MAXIMISING UTILISATION OF QUEENSLAND’S COAL AND
COAL SEAM GAS RESOURCES -
A NEW APPROACH
TO OVERLAPPING
TENURE IN
QUEENSLAND
MAY 2012
QUEENSLAND RESOURCES COUNCIL
© QUEENSLAND RESOURCES COUNCIL 2012
~*~
Foreword
4
Acknowledgements
6
1.
Introduction
7
1.1
1.2
1.3
1.4
1.5
1.6
Purpose
Background
Role of the QRC and the Joint Working Group
Industry Consultation
Objectives and Scope of the Working Group Process
Suggested Next Steps for Government
2.
Glossary
11
3.
Proposed Framework for Overlapping Tenure
15
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
Overview
Foundation Principles
Rolling Abandonment Model
Notice Periods
Compensation: Context and General Concepts
Compensation: Lost Production
Compensation: Affected Major Gas Infrastructure
Compensation: Affected Minor Gas Infrastructure
Compensation: Other Compensation-Related Issues
Synchronisation of Pre-Mine Drainage
Incidental Coal Seam Gas
Carbon and Royalty Liability
Hazard Minimisation
Environmental Approvals and Rehabilitation
Expert Determinations and Dispute Resolution
4.
Legislative Implementation
4.1
4.2
4.3
4.4
Transitional Arrangements
Harmonisation
Treatment of Concurrent Production Applications
Technical Working Groups
7
7
8
8
9
10
15
17
23
35
40
42
51
53
54
58
60
65
66
69
71
73
73
76
77
78
Schedule 1 – QRC and APPEA Overlapping Tenure Consultation
79
Schedule 2 – Specific Information Exchange Obligations
87
Schedule 3 – Overlapping Tenure Scenarios
88
Schedule 4 – Worked Example
93
Schedule 5 – Area for Grandfathered Production Tenure Applications104
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The following Submission Paper has been provided as a joint industry proposal
for a new legislative framework for managing coal and coal seam gas
overlapping tenure in Queensland. It has been prepared for consideration by
the Queensland Government. It should be noted that the proposal is for a
'whole package' framework. However, it must be acknowledged that certain
concepts will require further consideration and consultation.
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Foreword
It’s not widely appreciated that Queensland’s current framework for resolving overlapping
tenure was largely devised by industry. Back in the late 1990s, the then industry peak
body - the Queensland Mining Council - convened a small industry working group to
consider what should happen when a minerals tenure overlapped with a petroleum
tenure. This group of industry experts put aside their divergent commercial interests to
think about the broader State interest in trying to answer the question – what outcome is
in Queensland’s best interest?
Fast forward to 2012 and history is repeating itself. The industry’s peak body has evolved
into the Queensland Resources Council ('QRC') and this time the focus is on coal seam
gas ('CSG') tenures overlapping with coal tenures, with leaders from both sectors
rubbing shoulders around the QRC Board table. Once again, a small working group from
member companies – coal and CSG - have set themselves the challenge of identifying
the best outcome for the State of Queensland. QRC instigated and facilitated this
process, but the ideas came from our members who were willing to lend their commercial
expertise, but to do so cooperatively in developing a collective industry view.
The result is this important document. Industry has gone back to first principles and
proposed that the overlapping tenure rulebook be redrawn.
It is in Queensland’s best interests that both coal and coal seam gas have a clear path to
production. It is in Queensland’s best interests that both parties have an incentive to
negotiate outcomes which suit them. It is in Queensland’s best interest that royalties are
collected on both the coal but also on the gas that comes from those coal seams. These
are the outcomes that this report identifies as possible.
I appreciate the patience that the Government (former and current) and its Mines
Department have afforded industry during this industry process.
I extend my sincere thanks to the two industry champions, Mr Andrew Faulkner, Chief
Executive Officer of Arrow Energy, and Mr Stephen Dumble, Asset President, BHP Billiton
Mitsubishi Alliance, who have steered the working group processes and set the strategic
direction in developing this industry proposal. They have both led from the front.
Special thanks are due to the tireless efforts of the industry working group members
whose ideas and enthusiasm forged this new approach. In total, the joint industry
working group invested more than 200 hours of meeting time, working face-to-face, not
to mention all the countless hours that were poured into this project by people who have
very demanding day jobs. I extend my sincere thanks to joint industry working group
members and its Secretariat for their tenacity and endurance.
I would also like to acknowledge the CSG Explorers group for their intensive engagement
with the joint industry working group members during the consultation period. The CSG
Explorers group comprised representatives from Blue Energy, Comet Ridge, Exoma,
Galilee Energy and Westside Corporation. In the end, the CSG Explorers group's views
with regard to compensation differed from those of the Working Group. A separate
statement of the CSG Explorers group's views has been included in the body of this
report.
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I commend this report to the government, however, as the agreed position of the coal
industry and overwhelmingly of the CSG industry.
Michael Roche
Chief Executive
Queensland Resources Council
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Acknowledgements
The QRC would like to acknowledge and extend its sincere thanks to the following people
for their role in contributing to this proposal:
Industry Champions
Coal
Stephen Dumble
(BHP Billiton Mitsubishi Alliance)
Coal Seam Gas
Andrew Faulkner
(Arrow Energy)
Joint Industry Working Group Members
Coal
Coal Seam Gas
Gavin Verall (BMA)
Andrew Hackwood (Santos)
Janette Hewson (Peabody Energy
Australia)
Bill Koppe (Arrow Energy)
Jim Oliver (BMA)
Cecile Wake (QGC)
Shane Flint (Vale Australia)
Felicity Underhill (Origin Energy)
Tig Pocock (BHP Billiton)
Jim MacPherson (QGC)
Tom Northcott (Jellinbah Group)
Matt Paull (APPEA)
Tony Tarr (Xstrata Coal)
Naaz Kerin (APPEA)
Joint Industry Working Group Secretariat
Scott Singleton (Minter Ellison)
Ryan Gawrych (Minter Ellison)
Andrew Barger (QRC)
Katie-Anne Mulder (QRC)
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1.
Introduction
1.1
Purpose
The purpose of this report is to present a joint industry overlapping tenures framework
as an alternative to the January 2011 consultation draft of the Mines and Petroleum
Legislation Amendment Bill 2011 ('Draft Bill').
This report has been designed to provide:

an integrated solution to current deficiencies in the overlapping tenure regime for
coal and CSG;

default principles to encourage negotiated outcomes, which the broad industry
believes should underpin an overlapping tenure legislative framework in
Queensland, including detailed explanations on the package of principles, as well
as the advantages and trade-offs associated with such principles;

a series of worked examples/scenarios to illustrate the application of the
principles;

suggestions on how those principles may be implemented in practice; and

status of outstanding issues that will require further work and industry
consultation led by the Queensland Government.
Section 3.2 of this report provides a useful executive summary of the key principles
involved.
1.2
Background
The current legislative framework for managing overlapping coal and CSG tenure was
first introduced in 2004 with the passage of the Petroleum and Gas (Production and
Safety) Act 2004 (Qld) ('P&G Act') and associated amendments to the Mineral Resources
Act 1989 (Qld) ('MRA') and the Petroleum Act 1923 (Qld) ('Petroleum Act').
In the period since the framework was first introduced, there have been substantial
developments in the nature and scope of both the CSG and conventional coal mining
industries in Queensland. These developments, to both the technical and economic
landscape, have placed pressure on the existing overlapping tenure regime while
presenting both industries with a number of concerns and barriers to future
development.
In an effort to address a number of these issues, the Queensland Government released
the Draft Bill for comment on 20 January 2011. The stated purpose of the Draft Bill was
to ensure that the framework for overlapping coal and petroleum tenure adequately
supported the establishment of Queensland's CSG to Liquefied Natural Gas ('LNG')
industry and optimised the use of the State's coal and CSG resources.
There has been mixed reaction amongst the coal and CSG industries to the changes
proposed in the Draft Bill, including that:
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
the timeframes proposed in the Draft Bill in respect of initial consultation and
negotiation between overlapping tenure holders, as well as for potential resolution
through the Ministerial Preference Decision process, are too long to achieve
project certainty or facilitate timely project development;

the proposed amendments would fundamentally erode the security of tenure
necessary to underpin large, integrated CSG-to-LNG projects through mechanisms
(i.e. retention declarations and veto rights for exploration permits for coal ('EPCs')
holders) designed to prevent the grant of petroleum leases ('PLs') in
circumstances where production would not commence within 2 years of grant; and

the Draft Bill contains ongoing deficiencies in timing and process clarity, and
missed opportunities such as for harmonising safety provisions and optimising the
extraction and utilisation of incidental coal seam gas ('ICSG').
The Government's intention was to table the Draft Bill in Parliament by July 2011,
although this timeframe was delayed to seek a more mutually beneficial and industry
supported alternative.
1.3
Role of the QRC and the Joint Working Group
In November 2009, the then Premier requested an industry-led review of tenure and
project approval processes in Queensland. In April 2010, industry responded to the
Queensland Government with a comprehensive set of recommendations for reform which
were outlined in the report Supporting Resource Sector Growth. This industry review was
chaired by the QRC Chief Executive, Michael Roche, and captured the serious misgivings
of a number of QRC members (both within the coal and CSG industries) about the
current framework for resolving tenure overlaps. The Draft Bill was released in an effort
to address a number of these concerns.
Given the fundamental importance of tenure, the QRC instigated a series of meetings
between coal and CSG members to discuss the issues in early 2011. The membership of
the joint industry working group ('Working Group') emerged from the companies who
had expressed an interest in these QRC meetings, nominating representatives to sit on
the Working Group, as well as an industry champion for both the coal and CSG industries
to steer the Working Group’s scope of work.
The two peer-nominated industry champions appointed to oversee the Working Group
were Stephen Dumble (Asset President, BHP Billiton Mitsubishi Alliance) for the coal
sector and Andrew Faulkner (CEO, Arrow Energy) for the CSG sector. Both industry
champions are QRC board members.
The first joint meeting of the Working Group was held on 3 October 2011 and meetings
were conducted on a weekly basis, constituting over 200 hours of intensive face-to-face
discussion. The formalisation of the Working Group arrangement, and conduct of
discussions on a without prejudice basis, has seen members reflect an industry rather
than corporate perspective.
1.4
Industry Consultation
From 31 January 2012, QRC and the Australian Petroleum Production and Exploration
Association (‘APPEA’) led a two month consultation process with the wider coal and CSG
industries. A series of industry specific workshops were organised where members of
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both QRC and APPEA were invited to participate in discussions on the detail of the
proposed framework.
Further information regarding the wider industry consultation process is outlined in
Schedule 1.
1.5
Objectives and Scope of the Working Group Process
The key objective of the Working Group process has been the development of a joint
industry proposal for a new legislative framework addressing overlapping coal and CSG
tenures acceptable to both the coal and CSG industries. Unlike the Draft Bill, it is
intended that the proposed framework would represent a major change to the scope and
intent of the current overlapping tenure regime in an effort to more comprehensively
address the concerns of industry while facilitating the ongoing development of both
resources.
Accordingly, the legislative framework proposed by the Working Group is based on a new
paradigm, which seeks to:

establish a default outcome for resolving overlaps, while providing flexibility and
incentives for parties to negotiate mutually agreeable outcomes through a 'whole
package' approach;

recognise existing agreed co-development arrangements and an ability for parties
to negotiate their own bespoke co-development arrangements;

provide a direct path to production tenure grant for both coal and CSG;

facilitate the safe and timely development of both coal and CSG projects, including
through mandated information exchange obligations;

incentivise both the coal and CSG industries to fully utilise available resources and
drive behaviours conducive to the safe and efficient exploitation of both coal and
CSG;

facilitate the efficient
emissions;

maximise revenues available to the State by facilitating the development of both
resources;

eliminate or minimise the undue delay, 'lock out', veto rights and competition for
access for resources inherent in the current framework; and

avoid the binary outcomes associated with Ministerial Preference Decisions.
management
and minimisation of fugitive methane
The key principles are the subject of consensus amongst the Working Group and the
broader industries represented. Where the Working Group has not been able to reach an
agreed landing on some of the greater details which flow from the principles, further
industry consultation will be required as part of the government's technical assessments
and drafting process.
It is also important to note that, at no time during the Working Group process, was it
favourably considered to expand the ambit of the principles to overlapping greenhouse
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gas storage, geothermal and underground coal gasification (so-called mineral 'f') tenures.
QRC and the Working Group strongly suggest that any expansion of the proposed
framework to include such tenure would need to be carefully considered by industry as a
separate issue. Greenhouse gas storage, geothermal and underground coal gasification
participants were not invited to participate in the Working Group process.
1.6
Suggested Next Steps for Government
QRC anticipates that a further Government-led process of consultation and refinement
will take place relating to those sub-sections of the proposed framework which require
additional technical detail and scenario testing. It is suggested that there are at least five
further steps that will need to be undertaken by the Government with a view to preparing
draft legislation for introduction into parliament by the end of 2012.
QRC looks forward to working with Government to achieve these steps in a timely and
effective manner.
Step 1: Establish the government-industry technical working groups as detailed in
section 4.4 of this report to finalise outstanding issues of detail.
Step 2: Work with the QRC and APPEA on the development and implementation of
legislative harmonisation changes in the areas outlined in section 4.2 of this report,
which may be required for the proposed overlapping tenure framework to operate
effectively.
Step 3: Conduct further government-led consultation and refinement of the proposed
overlapping tenure framework to enable draft legislation to be prepared.
Step 4: Release draft legislation to industry for comment.
Step 5: Seek to introduce legislation by the end of 2012.
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2.
Glossary
Abbreviations
Definitions
Acceleration
Notice
means a notice which is issued by an ML holder which outlines a
period of truncation of the Notice Period and the area to which it
will apply as explained in section 3.4.3 of this report.
APPEA
means the Australian Petroleum Production and Exploration
Association.
ATP
means an authority to prospect granted under the P&G Act or
Petroleum Act.
CMSHA
means the Coal Mining Safety and Health Act 1999 (Qld).
Code Criteria
means the criteria outlined in section 3.13 of this report.
Code of Practice
means the code of practice proposed by the Working Group in
section 3.13 of this report to minimise the risk of hazard creation
due to gas drainage of, or through, mineable coal seams.
Confirmation
Notice
means the notice confirming mining development which must be
provided by an ML holder to overlapping CSG tenure holders at
least 18 months before any IMA or RMA comes into effect as
explained in section 3.3.2 of this Briefing Paper.
CSG
means coal seam gas.
CSG Small Caps
means the representatives of the CSG small capital exploration
industry.
DEHP
means the Queensland Department of Environment and Heritage
Protection.
Diluted ICSG
means ICSG which is extracted using underground in-seam and
goaf drainage techniques under vacuum, resulting in air
contamination within the gas.
DNRM
means the Queensland Department of Natural Resources and
Mines.
Draft Bill
means the Mines and Petroleum Legislation Amendment Bill
2011 (Qld).
EA
means an environmental authority issued under Chapter 5 of the
Environmental Protection Act 1994 (Qld).
EIS
means an environmental impact statement, prepared in
accordance with the provisions of the Environmental Protection
Act 1994 (Qld).
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EPC
means an exploration permit for coal granted under the MRA.
Field Assets
means wells and gathering
compressor stations.
Gas Facilities
means equipment and other facilities including infrastructure
established or used by a CSG tenement holder or its contractors
or authorised third parties to explore, extract, produce, store,
sell or dispose of gas.
Grandfathered
Production
Tenure
Applications
means those production tenure applications in a defined
geographical area which will remain under the existing
overlapping tenure regime under the transitional arrangements
proposed by the CSG Working Group members in section 4.1 of
this report.
FMA
means the 'future mining area', which will be the area within
which the ML holder intends to commence and carry out mining
in the future which is contiguous with, and beyond, the IMA.
ICSG
means incidental coal seam gas as defined within section 318CM
of the MRA.
IMA
means the 'initial mining area', which is the minimum area
representing 10 years of safe and efficient coal mining
operations based on the ML holder's Mine Plans and associated
mine infrastructure, as explained further in section 3.3.2 of this
report.
LNG
means liquefied natural gas.
Major ATP
Infrastructure
means pilot wells and associated infrastructure, as explained
further in section 3.9.1 of this report.
Major Gas
Infrastructure
means Gas Facilities not included in Field Assets and consists of
the items outlined in section 3.7.1 of this report.
MDL
means a mineral development licence (a mining exploration
retention tenure) granted under the MRA.
MHL
means a coal mining lease which includes an endorsement
permitting mining of mineral hydrocarbon (i.e. confers rights to
commercially produce CSG as well as coal).
Mine Plan
means the ML holder's bona fide plan (as revised, updated and
amended from time to time, materially consistent with both any
internal and joint venture development approvals) of a mine's
layout and workings, which will show for each IMA and FMA
associated with the mine for the relevant 10 year period:
(a)
lines
upstream
of
field/nodal
the location of relevant mining operations;
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(b)
the surface area proposed to be occupied or disturbed;
(c)
the Reference Date; and
(d)
the direction of mining operations.
Ministerial
Preference
Decision
means the decision which must be made by the Minister in
accordance with section 318BB of the MRA or section 319 of the
P&G Act.
Minor Gas
Infrastructure
means all Field Assets not included in the definition of Major Gas
Infrastructure, including those items which are outlined in
section 3.8 of this report.
ML
means a mining lease granted under the MRA.
MLA
means a mining lease application.
MRA
means the Mineral Resources Act 1989 (Qld).
Mtpa
means million tonne per annum.
Notice Period
means the minimum period of 10 years which
elapsed (or been truncated through the giving of an
Notice) before a CSG tenement holder can be
abandon an area (for inclusion in an IMA or RMA) as
section 3.4 of this report.
P&G Act
means the Petroleum and Gas (Production and Safety) Act 2004
(Qld).
PCA
means a potential commercial area (a petroleum exploration
retention tenure) granted under the P&G Act.
Petroleum Act
means the Petroleum Act 1923 (Qld).
PFL
means a petroleum facility licence granted under the P&G Act.
PL
means a petroleum lease granted under the P&G Act or
Petroleum Act.
PLA
means a petroleum lease application.
PPL
means a petroleum pipeline licences granted under the P&G Act.
QRC
means the Queensland Resources Council.
Reference Date
means the 'date-stamped' year marked on the mine panels of an
IMA or FMA on the Mine Plan indicating the year in which mining
activities are expected to commence.
must have
Acceleration
required to
explained in
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RMA
means the 'rolling mining area', which consists of incremental
areas representing 1 year of mining activity (i.e. a 'mine panel'
of no more than 10% of either the initial or future mine areas
such that the 'mine panels' are consistent in size) which are
created as mining operations advance beyond the IMA and into
the FMA, as explained in section 3.3.4 of this report.
Rolling
Abandonment
Model
means the model of advancing and retreating areas of coal and
CSG operations outlined in section 3.3 of this report.
SOZ
means the 'simultaneous operations zone', which is the
minimum area necessary for the ML holder's SSE to comply with
obligations under the CMSHA (as amended to clarify overlapping
safety roles) within which an overlapping CSG tenure holder may
operate subject to the safety requirements of the SSE, as
explained in section 3.3.3 of this report.
SOZSMP
means the simultaneous operations zone safety management
plan, as explained in section 3.3.3 of this report.
SSE
means the site senior executive, as defined in the CMSHA (being
the person with primary responsibility for safety in a mining
tenement).
SSM
means the site safety manager, as defined in the P&G Act (being
the person with primary responsibility for safety in a petroleum
tenement).
UCR
means unconventional and conventional reservoirs.
Undiluted ICSG
means ICSG that is free of air contamination and will generally
be extracted using surface to in-seam techniques analogous to
those that would be used by CSG tenure holders.
Working Group
means the joint industry working group formed by the QRC in
2011 for the purposes of considering issues relating to the
management of overlapping coal and petroleum tenure in
Queensland.
The plural includes the singular and vice versa.
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3.
Proposed Framework for Overlapping Tenure
3.1
Overview

Package of integrated principles which comprise the
framework for managing overlapping coal and CSG tenure.

Principles to act as legislative defaults replacing certain existing provisions of the
MRA, P&G Act and Petroleum Act.

Framework predicated on a number of foundation principles which are supported
by a further series of principles and mechanisms to implement the overall
framework.
proposed
legislative
The principles as formulated by the Working Group constitute a 'whole package' of
reforms. The principles are integrated to achieve an overall framework that more closely
aligns with the needs of industry, and as such, no principle or element of the package
should be viewed in isolation. It should also be noted that the integrated nature of the
principles means that there is a degree of convergence in many areas, with several
principles drawing from common underlying concepts.
To ensure the success of this package of reforms, the Working Group has been cognisant
of the need to:

incentivise both the coal and CSG industries to fully utilise available resources;
and

ensure the coal and CSG industries work cooperatively to achieve the best
commercial outcomes for both industries.
In achieving a new regime that is more certain and conducive to the future development
of both coal and CSG resources, the proposed framework of integrated principles has
therefore been predicated on a number of core 'foundation principles'. Each of these
'foundation principles' are detailed in section 3.2 and are supplemented by a number of
further principles and mechanisms which are necessary for ensuring the workability of
the proposed framework as a whole.
In this regard, the 'whole package' approach has been designed to apply in all
circumstances of overlapping coal and CSG tenure where the parties do not reach a
bespoke agreement. The intention is that the existing competitive tension and points of
friction in bilateral negotiations will be minimised by replacing the existing requirements
for grant of overlapping tenure under Part 7AA of the MRA, Chapter 3 of the P&G Act and
Part 6F of the Petroleum Act with default legislative outcomes. These default outcomes
would reflect the 'foundation principles', while preserving the ability within the framework
for proponents to negotiate more bespoke arrangements.
The proposed principles will therefore act as legislative baselines, effectively codifying the
management of overlapping tenure in Queensland. In essence, the proposed framework
will provide statutory default co-development arrangements which will apply unless
overlapping tenure holders agree to a specific co-development arrangement of their own.
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This will largely remove the key administrative hurdles to the grant of overlapping
production tenure, as well as the undue delays to resolving overlapping tenure issues and
associated veto rights which are inherent in the existing regime. This will also deliver
greater certainty for tenement applicants in achieving project approvals in a timely
manner.
The Working Group's objective has been to remove the existing competitive tensions
between the two industries and enshrine a default baseline for co-development, to create
a new paradigm which will deliver greater certainty, cooperation and joint development
of resources. This paradigm is expected to be driven by both concepts of equity and
market forces so as to maximise the benefit to all stakeholders.
The Working Group acknowledges that the principles may not have equal application in
all circumstances, but they provide a basic framework which is believed to be equitable,
workable and which will resolve the delays and potential stalling of developments under
the existing regime where parties are unable to reach agreement.
Further clarity in relation to how the principles are intended to operate as an integrated
framework is available in the scenarios set out in Schedule 3 and Schedule 4 to this
report.
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3.2
Foundation Principles

Direct path to grant for both coal and CSG production tenure.

Coal tenure holder to have a 'right of way' to develop coal deposits, subject to:

Notice Periods and confirmation requirements designed to moderate the
impact of this 'right of way' on underlying CSG projects;

compensation for lost CSG production in circumstances where the ML
holder elects to truncate Notice Periods;

compensation for impacts on certain existing gas infrastructure; and

a first right of refusal for CSG tenure holders in respect of any ICSG
produced in the ML area.

An ongoing obligation for overlapping coal and CSG tenure holders to exchange
relevant information.

Proponents will be free to negotiate other arrangements as an alternative to
legislative defaults.
3.2.1 Direct Path to Tenure
The current regime for managing overlapping tenure is unnecessarily complex and has
uncertain requirements for grant, with open-ended timeframes. The regime also affords
veto rights to holders of production tenements. As a consequence, the current regime is
stymieing growth and the development of overlapping resource projects in Queensland.
The Working Group therefore proposes that a fundamental principle of the new legislative
framework should be that there is a direct path to grant of production tenure, regardless
of any overlapping tenure. This will be achieved by decoupling overlapping tenure,
allowing for the grant of PLs over coal tenements and mining leases ('MLs') over CSG
tenements as of right, assuming all other (non-overlapping tenure) application
requirements are satisfied.
The rationale of this approach is that it removes many of the problems inherent in the
existing requirements for grant:

Removes uncertainty over grant of production tenures and timing. The
major benefit of the direct path to tenure approach is the removal of uncertainty
as to the grant of production tenures and the timing of such grants. It is also
expected that reducing the adversarial nature of the overlapping tenure regime
will facilitate the co-existence of production operations and will encourage a higher
degree of cooperation among parties in maximising joint resource exploitation,
including the exchange of operational and planning information (see section
3.2.3).

Removes administrative burdens and accelerates the grant process. A
direct path to grant also reduces the administrative burden for both proponents
and Government of assessing and responding to applications for overlapping
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tenure. By removing the requirements to negotiate and agree to coordination
arrangements as a precondition to grant, it is expected that application time
horizons will be compressed and parties will be free to proceed rapidly with coal
mining and CSG extraction without the delays associated with existing overlapping
tenure processes. The baseline principles which are proposed to replace the
existing regime requirements will then clarify the respective rights and obligations
of overlapping parties so as to create a more commercially sensible and workable
regime.

Removes the need for Ministerial Preference Decisions. In requiring
production tenure to be granted as of right, the proposal avoids the binary
outcomes associated with the Ministerial Preference Decision process and removes
the requirement for Government to ‘pick winners’.
The proposed principle also provides maximum benefit by unlocking access to areas for
production which would not be available (in the absence of agreement) under the
existing regime. Not only does this provide additional value to both industries, but it is
also conducive to the development of joint resources, preserves the optimum value
proposition for the State (in terms of royalties, rents, jobs and regional development),
frees up exploration opportunities and expedites production grants for both resources by
removing existing impediments.
The creation of a direct path to grant for overlapping production tenure represents a
fundamental shift in the way overlapping tenures are managed in Queensland, and is the
platform upon which the proposed framework has been based.
3.2.2 Right of Way for Coal
Implementing a direct path to grant for overlapping production tenure will be based on
the principle that an ML holder shall have an overriding 'right of way' to develop coal
deposits within a defined area of sole occupancy.
Having a 'right of way' for coal production is critical to decoupling tenure grant and
enabling the timely grant of PLs, notwithstanding the existence of overlapping coal
tenures. Without the 'right of way' principle, the grant of such PLs would introduce
significant uncertainty for future coal development. The Working Group is therefore of
the opinion that a 'right of way' for coal mining within a limited predetermined area is the
most sensible option in seeking to achieve the goal of facilitating CSG production and the
continued development and expansion of coal mines. This also reflects the smaller
relative tenure footprint of coal mining.
Accordingly, the 'right of way' principle will operate by allowing for the coexistence of
mining and CSG tenure over the same area, but PL and authority to prospect ('ATP')
holder rights will be temporarily suspended (subject to Notice Periods) within those areas
of the ML where sole occupancy is required for safe and efficient coal mining operations.
These areas of sole occupancy will be a subset of any ML overlap within a petroleum
tenement (irrespective of exploration or production status) and will be the minimum area
required for the conduct of safe and efficient mining operations at that point in time.
The underlying CSG tenure will remain in full force and effect notwithstanding the grant
of an ML. However, the CSG tenure holders rights will be modified in the area of sole
occupancy within the ML (see further section 3.3.3 in relation to operations outside the
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
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area of sole occupancy). In particular an overlapped PL holder (and ATP holder where
applicable) will:

retain rights to freely explore for and produce gas prior to and outside of the areas
of sole occupancy and will be free to conduct activities within the area of sole
occupancy if agreed with the ML holder;

be relieved from relinquishment obligations and work program conditions to the
extent of any area the subject of sole occupancy by the ML holder;

retain rights to take all CSG post-mining in seams which have not been targeted
by mining (subject to being economically and technically feasible);

have a first right of refusal to all ICSG produced from the area of ML overlap,
including the areas of sole occupancy; and

be free to negotiate commercial arrangements with the ML holder to conduct
activities within the areas of sole occupancy.
It should be noted that in the converse situation of coal exploration tenure overlapping a
PL, the principle will be that the coal party will be free to conduct exploration activities to
the extent that they can be conducted safely and do not affect upon CSG activities (see
section 3.3.5).
For overlapping coal and CSG exploration tenure, the principle will be that both parties
will be free to conduct exploration activities to the extent that they can be conducted
safely and do not impact upon each other (which is consistent with present
requirements).
Thus, in lieu of the existing rights to veto covering the whole of production tenements,
both mining and petroleum tenure rights persist subject to the area of sole occupancy
concept.
In this sense, the 'right of way' principle is not intended to be an ambit claim by the coal
tenement holder, and compensation for lost CSG production and affected CSG
infrastructure will be payable as a result of mining through the area of a producing PL if
the Notice Period is truncated. Where the Notice Period is not truncated, the ML holder
will be required to compensate for the relocation of all Major Gas Infrastructure (see
discussion in section 3.5 and 3.7). The concept is integral to a system which gives both
industries security of tenure, but acknowledges the practical realities of joint
development. The principle has been adapted from a number of existing negotiated codevelopment arrangements.
It is intended that the principle of the 'right of way' for coal mining, as well as the
determination and operation of areas of sole occupancy, will be implemented through the
Rolling Abandonment Model which is discussed below in section 3.3.
In order to moderate the adverse impacts that granting an ML holder a 'right of way' will
have on underlying CSG operations (especially where an ML is granted over a producing
PL), the exercise of such a 'right of way' will be subject to a number of restrictions:

Notice Periods and confirmation requirements. A key mitigant will be the
establishment of Notice Periods which must have elapsed before a CSG party is
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required to abandon or vacate an area of sole occupancy. It is intended that these
Notice Periods will provide the CSG party with an opportunity to maximise gas
recovery ahead of mining operations taking place. These Notice Periods will be
further supported by requirements to provide Confirmation Notices in advance of
key events taking place. The principles associated with these requirements are
discussed further in sections 3.3.4 and 3.4.

Compensation for lost CSG production. In return for the ML holder having a
'right of way', it is proposed that compensation be payable in circumstances where
the ML holder truncates the Notice Period. Compensation rights for lost CSG
production will only attach to PLs (both producing and non-producing) and may be
offset by 'make good' mechanisms, as discussed in section 3.6.4.

Compensation for affected CSG infrastructure. Where the exercise of the
'right of way' affects existing gas infrastructure, it is intended that the ML holder
would be liable to compensate the CSG party for those impacts. In this respect, a
distinction is drawn between Major Gas Infrastructure (e.g. processing facilities,
transmission infrastructure) and Minor Gas Infrastructure (e.g. wells, gathering
lines upstream of field/nodal compressor stations). An ML holder will be liable to
compensate for the relocation of all Major Gas Infrastructure, but will only be
liable to compensate for impacts on Minor Gas Infrastructure where Notice Periods
have been truncated, on the basis that CSG party has not had the full enjoyment
of the relevant Notice Period to make preparations in advance of the mining
operations. These principles are discussed further in sections 3.7 and 3.8.

First Right of Refusal to ICSG. As part of the trade-off associated with the 'right
of way', an ML holder will be required to offer a first right of refusal to supply ICSG
produced from the area of sole occupancy within the ML to an overlapping CSG
tenure holder (i.e. both ATPs and PLs). It is intended that the provision of such
gas will also defray impacts on ATP holders. The concepts underpinning the first
right of refusal mechanism are outlined in section 3.11.2.
3.2.3 Information Exchange
To ensure the workability of the proposed legislative framework, and to facilitate the
efficient conduct of overlapping coal and CSG activities, the Working Group proposes that
an overriding obligation be placed on both coal and CSG tenure holders to exchange
relevant operational and planning information. It is intended that this obligation would
arise regardless of the nature of the overlapping tenure (i.e. it would apply equally in
circumstances of overlapping exploration and production tenure) and would be supported
by appropriate enforcement mechanisms for non-compliance.
The Working Group suggests that the obligation to exchange information be formalised
through a general requirement for parties to meet regularly (frequency to be dependant
upon the stage of development and at least annually) to exchange and discuss relevant
information. As the utility of such information will be dependant upon its accuracy and
comprehensiveness, it is proposed that minimum requirements relating to the character
and content of information to be exchanged will be legislatively prescribed.
The Working Group acknowledges that further work will be required to develop these
minimum requirements, although it is suggested that any requirements should take the
form of a 'tick-box' default process that also streamlines existing data exchange and
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planning coordination processes. To this end, the information which could be expected to
be exchanged would relate to matters such as:

operational and development plans;

location of gas and mining infrastructure;

development and production goals;

scheduling of overlapping activities;

rehabilitation and environmental management; and

safety and hazard management.
In addition to the general obligation and process of information exchange, it is also
intended that specific requirements will be included within the legislative framework for
the exchange of certain information in given circumstances (e.g. exchange of production
tenure applications). These specific requirements are detailed in Schedule 2 and are
further discussed in the following sections of this report.
3.2.4 Bespoke Agreements
To aid in flexibility, and ensure that the proposed principles are not unduly restrictive, it
is intended that parties be given the right to depart from the proposed legislative defaults
by agreement.
In this sense, the legislation could potentially be structured similar to the replaceable
rules under the Corporations Act 2001 (Cth). This will allow for a baseline of certain and
predictable conduct but also acknowledges the rights of parties to come to alternative
arrangements where opportunities for further cooperation exist. An example of this would
be where an ML holder agrees to permit an overlapping PL holder to operate within the
area of sole occupancy beyond the relevant Notice Periods to maximise pre-mine gas
drainage. Indeed, the proposed framework seeks to incentivise parties to negotiate
bespoke arrangements, to not only drive greater cooperation, but to also give parties the
opportunity to maximise the benefits presented by their own individual circumstances
and commercial positions.
It is intended that any negotiated arrangements which replace legislative defaults, in
whole or in part, are to be notified to the Department of Natural Resources and Mines
('DNRM'). A mechanism would be required to ensure that in circumstances where such
agreements are concluded, third parties are aware that the statutory principles have
been displaced. This may involve the recording of the existence of any agreements on
the tenement register and provision for the agreements to be binding against future
assignees of the tenement.
However, all existing agreed arrangements will be preserved upon commencement of the
new legislative framework (see section 4.1).
3.2.5 Unconventional and Conventional Reservoirs
The principles agreed by the Working Group as part of this paper have been developed in
the context of CSG operations. The Working Group recognises that both the P&G Act and
the Petroleum Act have a scope and definition that is much broader than just CSG,
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encompassing 'petroleum' defined as 'hydrocarbons' which can be in the form of gas,
liquid or in a solid state.
The Working Group recognises the need to further investigate whether the principles
developed for coal and CSG overlapping tenure can be applied to petroleum generally in
the context of unconventional and conventional reservoirs ('UCR') from source rocks
other than coal.
Given the stratigraphic separation of coal from UCR it is likely that there will not be the
same level of resource conflict as seen between coal and CSG, which often may be
targeting the same coal seam or seams. Typically UCR will be at a depth well below that
of CSG operations and can reach depths in excess of 4,000 metres.
It is recognised that there are many inherent differences in UCR in comparison to CSG
including, but not limited to:

well cost and design;

well production profile;

development capital profile;

type and specification of down hole, surface and processing equipment; and

gathering and trunklines.
It is recommended that further discussion and industry consultation be conducted to
ascertain the applicability of these principles to UCR.
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3.3
Rolling Abandonment Model

Model of progressive advancing and retreating areas of operation underpinned by
the giving of advance notice to give effect to 'right of way' principles.

Model applies to both open-cut and underground operations, although differences
in application for underground context.

IMA = the 'initial mining area', which is the minimum area representing 10 years
of safe and efficient coal mining operations based on the ML holder's Mine Plans
and associated mine infrastructure.

FMA = the 'future mining area', which will be the area within which the ML holder
intends to commence and carry out mining in the future which is contiguous with,
and beyond, the IMA.

RMA = the 'rolling mining area', which consists of incremental areas representing
1 year of mining activity which are created as mining operations advance beyond
the IMA and into the FMA.

SOZ = the 'simultaneous operations zone', which is the minimum area necessary
for the ML holder's SSE to comply with obligations under the CMSHA (as amended
to clarify overlapping safety roles) within which an overlapping CSG tenure holder
may operate subject to the safety requirements of the SSE.

In an open-cut context, the ML holder will have sole occupancy over the whole of
the IMA for the duration of mining operations within the area of the IMA.

In an underground context, the ML holder must allow an overlapping PL holder
access to the IMA provided there are no impacts on the safe and efficient mining
of coal as determined by the ML holder's SSE, acting reasonably.

Permanent facilities and infrastructure within the ML remain within the IMA, and
the sole occupancy of the ML holder, until such time as the ML holder permanently
ceases mining activities that are dependent upon those facilities and
infrastructure.

Advance notice is required before an IMA takes effect (compliance with Notice
Periods and giving of 18 month Confirmation Notice).

CSG tenure holder's rights within the IMA (or the relevant parts of the IMA from
which the CSG party is excluded in an underground IMA) will be suspended.

An ATP holder's relinquishment obligations and work program conditions will also
be suspended to the extent of any areas of sole occupancy (whether an IMA or
RMA) for the duration of that sole occupancy.

Expansion (subject to compliance with Notice Period requirements) into the FMA
as mining operations advance outside the IMA, will be by annual addition of RMAs
each representing 1 year of incremental mining operations.

Both parties are under an obligation to meet regularly to exchange information
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and discuss development plans.
3.3.1 Overview
The Working Group proposes the introduction of a Rolling Abandonment Model, which
seeks to balance flexibility of operations with predictability of outcomes. The general
concepts associated with the Rolling Abandonment Model are not new, and have been
used in some current co-development and coordination arrangements to facilitate the
joint exploitation of resources.
Rolling abandonment involves pre-determined areas of sole occupancy within which CSG
rights will be suspended. As the mine face advances, the CSG tenure holder will
progressively abandon area to the ML holder. Similarly, as the area of active mining
operations advances there will be (subject to requirements for rehabilitation and
placement of essential infrastructure) a corresponding retreat of the area of sole
occupancy to enable the CSG tenure holder to re-access areas as soon as practicable.
The CSG tenure holder shall have advance notice before such areas take effect and will
otherwise have unfettered rights (subject to the requirements outlined in section 3.3.3)
to conduct CSG-related activities on the basis that CSG tenure holders can be
everywhere that ML holders are not.
The effect of this model is two-fold:

the CSG tenure holder has adequate opportunity to maximise CSG extraction
ahead of coal mining operations; and

there is an appropriate period of time for the CSG tenure holder to safely and
appropriately abandon such operations, progressively and only as required.
It should be noted that what is proposed is sole occupancy and not exclusivity. This
means that CSG rights have the potential to resume after mining activities have
concluded and overlapping rights are not extinguished. CSG rights will resume once it is
safe and efficient for the CSG party to do so. It is anticipated that this would be at some
point following rehabilitation of the relevant area by the ML holder, although parties
would be free to negotiate for resumption to occur at an earlier date if convenient. In
such a case, the statutory obligations of the ML holder's Site Senior Executive ('SSE')
would cease and the area would fall under the responsibility of the PL holder's Site Safety
Manager ('SSM').
The model also establishes parameters for joint resource development which will enhance
safety arrangements and aid in clarifying respective rights and obligations of overlapping
tenure holders. This in turn allows for the removal of restrictions under the existing
regime, including the blanket production tenure holder right of veto for overlapping
production grants and exploration activities.
In developing the principles around rolling abandonment, the Working Group has also
considered their application in both an open-cut and underground context. While the
same basic principles are applicable in both scenarios, there are some additional factors
which must be taken into account in relation to overlapping underground coal mining and
CSG operations (see discussion in section 3.3.7).
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3.3.2 Initial Mining Area
It is proposed that the area of sole occupancy for coal mining will be the Initial Mining
Area ('IMA') which is the minimum area that represents 10 years of safe and efficient
coal mining operations based on the ML holder’s Mine Plans (i.e. the area required for 10
years worth of production including associated long-term infrastructure). The IMA will
operate in an open-cut context so that the ML holder will have sole occupancy over the
whole area of the IMA for the duration of coal mining operations in the IMA. However,
the IMA will operate in a slightly different manner in an underground context, which is
discussed further in section 3.3.7. The principles regarding the extent of the IMA are
represented in Figure 1, although it is acknowledged that further work will be required by
a technical working group on establishing parameters around how the precise area of an
IMA is to be determined.
Indicative Dimensions of an IMA
By way of generalisation, it is anticipated that an open-cut (10 Mtpa) and underground (5
Mtpa) IMA would be approximately 10km2 with an average advance rate of 1km2/year.
The actual dimensions of the IMA should be based on bona fide planned rates of progress
over a 10 year period and will vary significantly depending on a variety of factors
including strike length, depth and thickness of the coal seam, mine construction
timelines, extraction rates, specific operational constraints and surface access issues. The
area of the IMA would also include associated long-term infrastructure.
The area of the IMA is then to be notified at the time that the ML application ('MLA') is
lodged and should reflect the ML applicant's Mine Plans based on 10 years of planned
progress. The ML holder will be required to substantiate the size of the IMA through the
exchange of information as part of the development plan process (see section 3.3.6). It
is therefore suggested that Mine Plans be provided to overlapping CSG tenure holders
which show projected areas of operation, although as discussed in section 3.3.6 the ML
holder will retain the flexibility to amend these plans as mining progresses. In any
situation of dispute regarding the size of an IMA, mechanisms should also be put in place
to allow for referral to an independent expert for determination.
Given the nature of mining operations, it is conceivable that there may be a need for
multiple IMAs to exist within the area of a single tenure overlap. There is no intention to
place restrictions on the ML holder's ability to establish multiple IMAs (i.e. there is no
requirement that such areas are contiguous), provided they are identified at the time the
MLA is lodged by reference to bona fide development plans.
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Figure 1 – Extent of the IMA
As with the other principles advanced by the Working Group, it is intended that parties
will be free to agree to alternative arrangements regarding the size of the IMA and the
manner of operations conducted therein. This will allow parties to pursue opportunities
for further cooperation where desired and would, for example, allow for overlapping
tenure holders to conclude appropriate pre-mine drainage arrangements (see discussion
in section 3.10).
Before any IMA takes effect, the ML holder will be required to give advance notice to
affected overlapping tenure holders. An ML holder will therefore be required to comply
with the Notice Periods discussed in section 3.4.
The overall philosophy therefore is that the IMA be as small as possible within operational
and safety constraints and for Notice Periods to be for as short a timeframe as is
necessary to provide the CSG tenure holder with the opportunity to derive the bulk of the
production and economic benefit from wells and other minor infrastructure within the IMA
before it is required to abandon those facilities.
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A key principle is that, in order to maximise potential CSG production, the CSG tenure
holder should not be required to abandon the IMA (or any subsequent Rolling Mining
Area – see section 3.3.4) until the ML holder is actually ready to commence mining
activities in the relevant area. Accordingly, the ML holder must give 18 months' advance
notice confirming that mining activities are to commence ('Confirmation Notice') before
an IMA would take effect. The intention behind this Confirmation Notice is to link the
rights of sole occupancy associated with the IMA to actual mine development.
Once the IMA takes effect it would persist for a period of 10 years, consistent with the
area of operations which it is designed to represent. During this period, the ML holder's
sole occupancy rights will be limited to within the IMA (in an open-cut context) to the
extent of any overlap with the relevant CSG tenure.
3.3.3 Simultaneous Operations Zone
In order to facilitate safety arrangements for the coexistence of both coal and CSG
activities, a simultaneous operations zone ('SOZ') around the IMA is proposed in which
CSG proponents may operate subject to the safety requirements of the ML holder's SSE
(see Figure 2). It is anticipated that the ML holder would also be operating to a limited
degree in this area and may, for example, locate temporary supporting infrastructure in
the SOZ. CSG operations conducted outside of the SOZ would remain unfettered.
The rationale behind the existence of the SOZ is to ensure that joint operations
conducted around the IMA do not compromise safety or otherwise deleteriously impact
upon joint resource exploitation. Given the considerable requirements placed upon the
SSE under the Coal Mining Safety and Health Act 1999 (Qld) ('CMSHA'), the Working
Group is of the opinion that the ML holder should retain responsibility and control the
conduct of activities in the SOZ. It is also submitted that the CMSHA and P&G Act should
be amended to clarify the responsibilities of the SSE and the PL holder's SSM in areas of
production overlap.
The SOZ will accordingly be the minimum size necessary for the SSE to comply with their
obligations under the CMSHA as amended, as well as having regard to the technical
mechanics of managing coexisting infrastructure. It is expected that the delineation of
the SOZ will not be uniform the entire way around the IMA, and would be a free-form line
reflective of the risk profile of the activities being conducted within the relevant area
from time to time. In this sense, at any given time the SOZ may be relatively narrow in
some areas around an open-cut IMA (where safety concerns are less pronounced, such
as around non-active spoil dumps) while being more expansive in others (where there
are significant safety concerns, such as around potential blasting areas).
As is the case with the IMA, the size of the SOZ would need to be substantiated through
an exchange of mine development plans and any dispute would be dealt with through
independent expert determination.
The boundaries of the SOZ will change over time depending on the nature of the
activities that are the subject of the SOZ. For example, once an activity such as blasting
has ceased in an area or as the active mining area has passed beyond a certain area the
SOZ would retract accordingly.
To ensure the integrity of the SOZ concept, it is proposed that both coal and CSG tenure
holders be required to act in accordance with a Simultaneous Operations Zone Safety
Management Plan ('SOZSMP') in relation to the area of the SOZ. This will necessitate
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further amendment to the CMSHA and the P&G Act to ensure there is a clear delineation
of responsibilities between the coal and CSG parties with associated carve-outs where
appropriate. A mechanism will also be required to resolve any disputes between the
parties regarding the content of the SOZSMP as well as fixed time periods around the
joint SOZSMPs creation and subsequent amendment (which will be required as the SOZ
rolls forward as discussed in section 3.3.4).
The Working Group proposes that if such arrangements are broadly acceptable to
industry, a specialist group of safety and technical experts be formed to consider how
responsibilities may be practically divided, along with the mechanics of managing
coexisting infrastructure within the SOZ area.
3.3.4 Abandonment and Rolling Mining Area
Initial
Mining Area
(IMA)
SOZ
SOZ
At the expiration of the relevant Notice Period (see section 3.4), CSG tenure holders will
be required to abandon the whole of the IMA (unless otherwise agreed) as demonstrated
in the example provided in Figure 2. This means that any producing wells in the area of
the IMA which have not been drained within the Notice Period must be abandoned.
Compensation will not be payable for lost CSG production where the Notice Period has
fully elapsed, although compensation would be required in circumstances where the
Notice Period was truncated (see sections 3.4 and 3.5).
Mine
advancing
Future
Mining Area
(FMA)
Figure 2 – Formation of the IMA. The diagram above shows an overlay of an open-cut
mine plan over the area of an existing gas field. In the first year, the IMA is established
with a whole of life SOZ surrounding the IMA. The gas wells inside the IMA are to be
abandoned upon its formation. Over time, the coal miner will advance operations through
the IMA. Note: The SOZ as pictured represents its full extent over the 10 year period. In
reality the SOZ is the safety buffer around the active mine area and supporting
infrastructure and it will move forward progressively as the IMA or FMA is mined over
time (and will retreat as mining operations are concluded).
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Once mining operations reach the outer limit of the IMA, the area of sole occupancy for
coal mining may expand into the Future Mining Area ('FMA') through the sequential
addition of Rolling Mining Areas ('RMAs') in which panels of area are added as mining
operations advance outside the IMA. These RMA panels are to represent an area
equivalent to 1 year worth of coal operations, such that the FMA progressively advances
in step with mine development. Simultaneously, CSG proponents will be required to
abandon those areas affected by the advancing panels of the RMA, while the SOZ itself
will roll forward as the area over which coal operations are being conducted progresses
forward contiguously. The size of the RMA panels would also need to be substantiated by
reference to Mine Plans based on real rates of projected progress. Any disputes would be
resolved by independent expert determination.
Mine advancing
and Confirmation
Notice given
SOZ
SOZ
Figure 3 and Figure 4 demonstrate the way in which the advancing panels of the RMA will
operate in an open-cut context.
RMA Commences
1st Row of Wells
Abandoned
Figure 3 – Giving of Confirmation Notices and Advancing of RMA. As the mine face
advances to the outer edge of the IMA, a Confirmation Notice is given 18 months prior to
the first RMA panel forming. The first row of CSG wells is then abandoned after 18
months and the first panel of RMA area is established. Note: The SOZ as pictured
represents its full extent over the 10 year period. In reality the SOZ is the safety buffer
around the active mine area and supporting infrastructure and it will move forward
progressively as the IMA or FMA is mined over time (and will retreat as mining operations
are concluded).
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SOZ
SOZ
RMA & SOZ
Advancing Further
Confirmation
Notice Given
Wells Abandoned
as RMA Advances
Further
Figure 4 – Continued Expansion of the RMA. As mining operations advance, the RMA
and SOZ continue to expand with the issuing of Confirmation Notices 18 months before
further CSG wells are required to be abandoned. Note: The SOZ as pictured represents
its full extent over the 10 year period. In reality the SOZ is the safety buffer around the
active mine area and supporting infrastructure and it will move forward progressively as
the IMA or FMA is mined over time (and will retreat as mining operations are concluded).
At the time the IMA is established (i.e. at the time that the MLA is lodged) the coal
tenure holder must also provide projections of the relevant RMAs within the FMA with
each additional RMA panel being 'date-stamped' with the coal tenure holder's best
estimate of when each panel will be mined in accordance with its Mine Plan ('Reference
Date').
This 'date-stamping' of mine panels outside of the IMA with their Reference Date serves
two purposes. Firstly, it provides the CSG tenure holder with information necessary for it
to plan its operations so as to maximise CSG production before it is required to abandon
an area. Secondly, in the event that the ML holder subsequently changes its mine
development plans, it provides a benchmark against which the period of notice given to
the CSG tenure holder can be measured for each panel. The intention is not to unduly
restrict the ML holder's operational flexibility in this regard, and the ML holder will be free
to amend Mine Plans as operations advance.
However, if the effect of the operation of this operational flexibility is to give the CSG
tenure holder less than the applicable Notice Period before it is required to abandon an
RMA panel, then compensation will be payable (see section 3.5.2).
The process of advancement and retreat which characterises the Rolling Abandonment
Model is intended to be structured around the issuing of Confirmation Notices to CSG
tenure holders identifying the RMA and the wells in the SOZ which are to be affected, at
least 18 months ahead of any 1 year panel of production area beyond the IMA coming
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into effect. It is also expected that while a Confirmation Notice is issued a minimum of 18
months in advance, parties should be aware of plans to expand into and extend the RMA
as a result of the ongoing obligation to discuss development plans (see section 3.3.6).
The Rolling Abandonment Model is responsive to changes in the rate of mining in that it
facilitates the ML holder’s need to accelerate mine activities but permits the CSG tenure
holder to remain longer should the rate of progress be slowed. This ensures that CSG
tenure holder has the opportunity to maximise the CSG recovered from wells subject to
future abandonment.
3.3.5 Exploration Activities
The Working Group proposes the removal of blanket veto rights for exploration activities
which are conducted on production tenements. However, the conduct of exploration
activities will be subject to a requirement that any activities which are undertaken must
not adversely affect safe and efficient production activities on the overlapping production
tenure. All exploration activities will also be subject to safety directions from the relevant
officers of the production tenure holder (either the SSE for MLs or the SSM for PLs).
In circumstances where there are overlapping exploration tenures, it is proposed that the
existing restrictions on the conduct of activities be retained (i.e. the activities must not
adversely affect those activities which have already commenced on the overlapping
tenure).
3.3.6 Development Plans and Information Exchange Obligations
It is envisaged that as part of the general information exchange obligations discussed in
section 3.2.3, parties will exchange and meet to discuss and update development plans
on a regular (but not less than annual) basis. Upon the lodgement of a production
tenement application (whether a petroleum lease application ('PLA') or a MLA), the
applicant would also provide a copy of their development plans to the overlapping tenure
holder.
These information exchange obligations will help facilitate an understanding of each
party's development and production goals while identifying the areas in which operations
are to be conducted. This will allow both parties to structure operations around each
other accordingly and will be vital in maximising joint resource exploitation.
Aside from facilitating the smooth operation of the Rolling Abandonment Model,
information exchange will also assist in the management of compensation liabilities. As
discussed in section 3.5.2, compensation will be payable for lost CSG production in
circumstances where a PL holder is not given the full Notice Period. Early dialogue around
development plans will therefore minimise the effect of any changes and will also allow a
ML holder to make an informed economic decision on the appropriateness of accelerating
mining operations by truncating Notice Periods (see section 3.4.3).
Similarly, upfront and ongoing dialogue on development plans will assist in the placement
and operation of infrastructure so as to minimise compensation and disruption which
might otherwise arise in circumstances where it is required to be relocated. Ideally, CSG
tenure holders would seek to establish all major infrastructure outside any foreshadowed
mining areas where there is sufficient evidence or clarity around future coal development
plans. Appropriate notice and engagement on development plans would be essential to
achieving this outcome. Early engagement will also assist both parties in locating
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permanent infrastructure outside of areas that are highly prospective for development.
The potential need to relocate infrastructure in the future can be reduced through upfront
and ongoing dialogue as part of the planning process.
Parties are also incentivised to formulate joint infrastructure plans for the coordination of
operations within the SOZ which would need to be updated annually. The creation and
operation of such plans will therefore also be assisted by an ongoing obligation to
exchange information.
Given the importance of development plans to both compensation and the structuring of
mine advancement and gas well abandonment, it is also proposed that a greater degree
of flexibility be built into the system for updating development plans through an annual
amendment process whereby progress can be reviewed and planned activities can be
discussed and agreed. This will ensure that a slight change to a Mine Plan doesn't
automatically trigger compensation entitlements, but will also allow both parties to
respond to a scenario where there are distinct active mining zones such that the CSG
proponent could operate longer in a given area if the ML holder is delayed.
3.3.7 Rolling Abandonment Model and Underground Operations
As discussed above, the Rolling Abandonment Model is generally applicable to
underground as well as open-cut operations. Nevertheless, underground operations pose
slightly different access issues which require a modified application of the Rolling
Abandonment Model.
In applying the proposed default principles of the Rolling Abandonment Model, the IMA
for an underground mine would continue to be the minimum area representing 10 years
of safe and efficient coal mining operations, structured within a three dimensional
context, but the ML holder would not have sole occupancy over the whole of the IMA.
It is proposed that the ML holder would have sole occupancy over only that part of the
IMA representing the minimum area required for safe and efficient operations as
determined from time-to-time by the ML holder's SSE, acting reasonably. These areas of
sole occupancy are likely to include underground mining related seams as well as any
non-mining related seams and surface land area over which sole occupancy is necessary
for safety reasons. Outside of these areas, the ML holder would be required to allow an
overlapping CSG tenure holder reasonable access to the IMA to conduct simultaneous
operations, provided such operations did not impact on safe and efficient mining.
The rationale of this approach is that it will reduce the impact on pre-existing CSG
operations, maximising joint resource exploitation and preserve the ability for both
parties to traverse the surface of the overlapping area. This will be especially important
in circumstances where an ML is granted over an already producing PL which is likely to
have existing infrastructure such as wells and collection systems in place. In this
scenario, the ML holder may be incentivised to leave existing CSG infrastructure in place
to facilitate safe coal mining operations or to reduce/offset any potential compensation
liability otherwise owed to the PL holder as a result of truncating a Notice Period.
The stratification of underground operations also means that it may be possible for coal
and CSG operations to operate concurrently within the same area (provided it does not
impact on safe and efficient mining). The conduct of coal mining operations may be
temporary in nature (especially in regards to surface access as mining operations
advance underground), and there is scope for greater co-development in the three
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dimensional context of underground operations if sole occupancy rights are restricted to
only those areas which are necessary for safe and efficient coal mining operations.
Notwithstanding this, the 'right of way' for coal mining within the IMA will mean that the
ML holder retains full flexibility to operate within the whole of the IMA without any need
to pay additional compensation for changes to Mine Plans within that area, even if the
abandonment of gas wells or infrastructure is required. In this sense, while a CSG tenure
holder may operate within the area of the IMA, any such operations will be at the CSG
tenure holder's sole risk on the basis that the ML holder could at any time (subject to
safety considerations) require the CSG tenure holder to cease activities and remove
infrastructure from a given area within the IMA.
To ensure the continued safe and efficient mining of coal within the IMA, the SSE for the
ML would have the power to direct or prohibit activities conducted by the CSG tenure
holder within the IMA. It is intended that no new wells or infrastructure could be placed
within the IMA without the consent of the SSE (acting reasonably, having regard to
requirements for safe and efficient mining). This would ensure, for example, that new
wells did not cut across mine layouts. The continued operations and use of infrastructure
by a CSG tenure holder within the IMA would also be subject to the oversight of the SSE.
CSG activities within an underground IMA will operate under an arrangement analogous
to that which would apply within a SOZ, and both the ML holder and CSG tenure holder
would be required to operate in accordance with a joint safety management plan (see
discussion in section 3.3.3). Given the complexity of managing these safety
responsibilities, further consideration by appropriate technical and safety experts will be
required in establishing any legislative defaults and suggesting further amendments to
the CMSHA and P&G Act.
Outside of the IMA, it is intended that the general principles of the Rolling Abandonment
Model would continue to apply in an underground context. The IMA would therefore be
surrounded by a SOZ and the IMA would expand into the FMA as mining operations
advanced underground. CSG tenure holders would be unfettered by the ML holder in the
conduct of activities within both mining related and non-mining related seams which fell
outside of the IMA, active RMA and SOZ and would be required to abandon the area as
the RMA advanced (subject to the ability to continue carrying out CSG activities at their
sole risk where the safe and efficient mining of coal is not affected).
3.3.8 Land Access Principles – Overlapping Tenure Regime
In order to ensure the workability of the Rolling Abandonment Model given the defined
timeframes that a CSG tenure holder may face in conducting its activities, it is essential
(where an ML holder or related body corporate is also the owner of the underlying land)
that the process of land access be expedited for the purposes of conducting authorised
activities under the P&G Act or the Petroleum Act in advance of mining on that land.
The ML holder should not, in these circumstances, use its rights as a landowner to
impede or delay the CSG tenure holder from accessing the land as expeditiously as
possible. However, the ML holder should use reasonable endeavours (when agreeing to
third party rights over land) to minimise the risk of further fettering the CSG tenure
holder's activities.
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The Working Group proposes that the development of land access principles is a matter
that should be considered further by a relevant technical working group. Such principles
should include the concepts which are set out in the text box below.
Land Owned by the ML Holder
 The ML holder will consent to entry onto its land by the CSG tenure holder for the
purpose of conducting CSG activities.
 This would constitute a 'right to enter land' under the P&G Act and Petroleum Act.
 The ML holder will retains all rights under the P&G Act and Petroleum Act as a land
owner, including the right to be compensated.
 The ML holder agrees to provide a schedule of land that it owns and provide regular
updates reflecting any changes in land ownership.
 Appropriate recognition of circumstances in which the ML holder is not the same entity
as the owner of the underlying land (i.e. will use reasonable endeavours to procure
consent).
Land Owned by the ML Holder which is Leased to Third Parties
 The ML holder will have regard to the land access requirements of the CSG tenure
holder before the renewal or granting of any new occupation rights to a third party
over the relevant land.
 Recognition that third party infrastructure easements may be required from time to
time. As such, flexibility will be required without imposing significant capital costs or
delays on either the ML or CSG tenure holders.
Compensation
 The CSG tenure holder and the ML holder will enter into good faith negotiations to
agree the amount of compensation to be paid, commensurate with those paid in the
area.
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3.4
Notice Periods

A minimum Notice Period of 10 years must have elapsed before a CSG tenure
holder is required to abandon an area. 10 years notice will be required before the
IMA takes effect where an ML is granted over a PL (subject to compensation for
lost CSG production where the Notice Period is truncated).

The 18 month Confirmation Notice will serve as advance notice before the IMA
takes effect where an ML is granted over an ATP.

Once the IMA has been formed, the Notice Period of 10 years will roll forward as
mining activities progress under the Rolling Abandonment Model.

Notice Periods may be extended up-front in exceptional circumstances for highperforming wells or fields.

The ML holder may truncate Notice Periods by issuing an Acceleration Notice. This
will give rise to compensation obligations.
3.4.1 Purpose and Function of Notice Periods
Under the proposed legislative framework, a Notice Period of 10 years must have elapsed
before a CSG tenure holder is required to abandon or vacate an area and give way to
coal mining activities. The rationale is that the period of 10 years advance notice will
allow the CSG tenure holder to maximise gas extraction and extract the bulk of
production and economic benefit from wells and infrastructure before it is required to
abandon those facilities.
It is also intended that in the case of the initial Notice Period which must elapse prior to
the formation of an IMA (the area of which the CSG tenure holder would be required to
abandon), the relevant period of time shall run from a point which is 12 months after the
lodgement of the MLA so as not to be subject to the elasticity of timing for approvals.
Parties will also be free to negotiate alternative arrangements for longer or shorter Notice
Periods where relevant.
The relationship which has been created between the duration of the IMA and the
structure of the Rolling Abandonment Model means that once the initial Notice Period has
elapsed and the IMA has been formed, a rolling Notice Period will exist in lock-step with
the conduct of mining operations. In this sense, the principles relating to advance notice
and the Rolling Abandonment Model attempt to ensure that an overlapping CSG tenure
holder will have a minimum advance Notice Period before they are required to abandon
any area. It should be noted that this requirement will reinforce the importance of the
general information exchange obligations and date-stamping of Mine Plans with
Reference Dates as discussed in sections 3.2.3 and 3.3.6.
The exception to these general principles will be in circumstances of an ML being granted
over an ATP. In this scenario, only an 18 month Confirmation Notice confirming that
mining development will proceed as scheduled (which can be issued on and from the
lodgement of the MLA) will be required before the formation of the relevant IMA. Once
the IMA has been established, the rolling Notice Period would apply to future activities.
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The logic of the Notice Period concept is that it mitigates the impact of the ML holder's
'right of way' by giving the PL holder a minimum 10 year 'production window' in which it
has an unfettered ability to extract gas from an affected area and any truncation of the
Notice Period will give rise to compensation liability for lost CSG production (see section
3.5.2).
The Working Group's intention is that this minimum 10 year 'production window' will
allow the PL holder to maximise gas recovery with a view to extracting the majority of
the gas from a well before that well must be abandoned to give effect to the ML holder's
'right of way'. The Working Group acknowledges that in individual cases, the rate of
production and production profile will vary according to the specific gas and coal
properties in situ. On this basis, an attempt has been made in structuring Notice Periods
and the Rolling Abandonment Model to ensure that PL holders always have at least 10
years’ advance notice before they are required to abandon areas in which CSG is being
produced. It should be noted that while a 10 year window is unlikely to allow for all of the
economic benefit of the gas to be extracted, an overlapping CSG tenure holder will be
given a first right of refusal to any ICSG produced from the area abandoned (see section
3.11).
In the context of an ML over an ATP which is eventually converted to a PL, the CSG party
will have had the opportunity to try to design its operations knowing what is happening
with the mine, given the information exchange obligations discussed in section 3.3.6. The
rolling Notice Period shall continue to apply, noting that the IMA has already been
established. This formulation reflects the status of the overlapping tenures at the time
the ML is granted.
Examples
Mine Co. applies for an ML over an existing PL
Mine Co. identifies the IMA in its MLA. Gas Co. has 3 months to review, and if required,
provide proof of high performing wells/fields that would justify the extension of the
Notice Period (see section 3.4.2). Where there is no extension, the 10 year Notice Period
will run from the date which is 12 months after the MLA lodgement date. 18 months
before the IMA is to take effect (i.e. at 8.5 years or later), Mine Co. issues a Confirmation
Notice, notifying Gas Co. of the need to abandon the area of the IMA.
Mine Co. applies for an ML over an existing ATP
Mine Co. identifies the IMA in its MLA. Eighteen months before the IMA is expected to
take effect, Mine Co. issues a Confirmation Notice, notifying Gas Co. of the need to
abandon the area of sole occupancy within the IMA. The issuing of the Confirmation
Notice is not linked to the ML grant date. Once the IMA takes effect, Gas Co. may
continue to undertake exploration activities outside of the area of sole occupancy
provided such activities do not adversely affect safe and efficient mining. Exploration
activities conducted by Gas Co. within the area of overlap with the ML would be subject
to safety directions by Mine Co.'s SSE.
Gas Co. applies for a PL over an existing ML
No Notice Periods will apply to Gas Co. upon lodgement of the PLA. The PL can be
granted over the IMA (noting that the IMA has already been notified and established),
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RMA and non-mining areas of the overlapping ML, although Gas Co.'s rights under the PL
will be temporarily suspended in areas of Mine Co.'s sole occupancy. The rolling 10 year
Notice Period will apply to Mine Co.'s operations as it progresses into previously unnotified RMAs.
Gas Co. applies for a PL over an existing EPC/MDL
No Notice Periods will apply to Gas Co. upon lodgement of the PLA outside of the general
mandatory information exchange process. Mine Co. can continue to undertake
exploration activities provided such activities do not adversely affect safe and efficient
gas production. Exploration activities conducted by Mine Co. within the area of overlap
with the PL would be subject to safety directions by Gas Co.'s SSM.
As such, the rationale behind the Notice Period concept is not about keeping coal miners
out for as long as possible, but rather focusing resources on where the coal miner will be
in the future and then operating where the coal miner is not, so that the amount of gas
extracted is maximised. By virtue of a PL holder knowing an area is at risk of future
abandonment beyond the relevant Notice Period, the PL holder will be incentivised to
front-load its capital expenditure to accelerate production (which may be subsidised by
the ML holder, if agreed), especially if financial compensation is to be regarded as suboptimal. By comparison, the driver for ML holders is to allow PL holders the longest
reasonable period of time to de-gas an area which in turn may offset compensation and
carbon liabilities.
Ultimately, the proposed Notice Periods have been structured to give a degree of
certainty around operational timelines in the context of establishing the default outcome
of coexisting production operations.
3.4.2 Extension of Notice Periods
The proposed legislative framework is also to include a mechanism which allows
extension of the relevant Notice Period in exceptional circumstances.
These exceptional circumstances relate to high performing wells or fields where the 10
year Notice Period is not sufficient to allow the bulk of production and economic benefit
within that 10 year period. It is not intended that exceptional circumstances would lead
to exclusion for mining, but rather an extension of the Notice Period (i.e. truncation with
compensation would still be possible – see section 3.4.3). The period of extension will
vary in each circumstance but is intended to apply only in exceptional circumstances.
The Working Group envisages regulations will include specific criteria regarding the
definition and eligibility of such exceptional wells or fields. The criteria will need to be
developed by a technical working group, and should include guidelines on the calculation
of the appropriate period of extension.
Exceptional circumstances (including the requested extension) must be claimed within 90
days of MLA lodgement, identifying high performing areas over the entire MLA, and not
just the IMA. The MLA applicant then has 90 days to review and either accept or dispute
the claim of exceptional circumstances. If parties have not reached agreement 180 days
after lodgement of the MLA, the matter is referred to an independent expert. The
decision of the independent expert, including on the length of any extension, is binding.
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It is also anticipated that any extension will be examined on a case-by-case basis as to
whether it would apply to a single well or an entire field.
Exceptional circumstances may also be claimed when an MLA is made over an ATP,
however, any extension to Notice Periods would not commence until the ATP has been
converted to a PL, and only where there are changes to an existing IMA or RMA.
For areas outside the IMA or RMA (i.e. those areas to which the PL holder retains
unfettered access), should the ML holder change its Mine Plan triggering truncation of the
applicable Notice Period, the ability to claim exceptional circumstances is re-opened. The
Working Group notes the importance of the continuing information exchange requirement
to facilitate this.
While the formal process is scheduled to be triggered after MLA lodgement, it is expected
that the flagging of potential high performing wells would be raised by CSG tenure
holders during the continuing information exchange to assist both sides in their planning.
Examples
Mine Co. applies for an ML over an existing PL
On lodgement of an MLA, and identification of the IMA, Gas Co. has 90 days to present to
Mine Co. the case for 'exceptional circumstances' fulfilling criteria set out in regulations
on high performing wells or fields, including Gas Co.’s requested extension to the Notice
Period. Mine Co. has 90 days to review, and either accept or dispute the extended Notice
Period.
If there is disagreement, the case goes to an independent expert whose ruling is binding.
Where exceptional circumstances and therefore an extension to the Notice Period are
accepted, the extended Notice Period will run from the date which is 12 months after the
MLA lodgement date. 18 months before the IMA is to take effect (i.e. at 13.5 years for a
15 year Notice Period, 18.5 years for a 20 year Notice Period), Mine Co. issues a
Confirmation Notice, notifying Gas Co. of the need to abandon the area of the IMA.
3.4.3 Truncation and Acceleration Notices
It is proposed that despite the restrictions placed on the commencement of mining
operations associated with the Notice Period principles, an ML holder will have the ability
to bring forward the timing for abandonment and accelerate mining in return for either
compensation and/or funding of accelerated gas extraction operations (the latter being
subject to agreement with the PL holder).
Where an ML holder elects to truncate any Notice Period, and agreement has not been
reached on funding accelerated extraction, a notice must be issued which states the
period of truncation and the area to which it will apply (‘Acceleration Notice’). This will
trigger compensation rights for overlapping PL holders to lost CSG production, the
quantum of which will be calculated in accordance with the principles discussed in section
3.6.
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Example
Mine Co applies for an ML over an existing PL held by Gas Co in April 2012. The 10 year
Notice Period will commence in April 2013. Mine Co desires to start mining operations in
2018 which is 5 years before the expiration of the Notice Period. Mine Co issues an
Acceleration Notice in 2013 stating that it wishes to truncate the Notice Period and
accelerate mining operations which will affect 3 gas wells which are currently in
production. The Acceleration Notice states that mining operations are to commence in
2018 and identifies the location and area affected by geographic coordinates and
surveyed maps. Compensation would be payable for lost CSG production between 2018
and 2023 within the area affected (i.e. the early IMA start date and the Notice Period
expiry date).
As compensation will be calculated from the time acceleration of mining activities beyond
the area of sole occupancy occurs, it is not proposed to fix a minimum period for the
giving of Acceleration Notices. However, any Acceleration Notice would still need to be
given with sufficient time to allow a PL holder to re-sequence their operations and
abandon the area safely and a Confirmation Notice would still be required before the IMA
was formed (see section 3.3.2).
The truncation and Acceleration Notice mechanisms will therefore prevent the Notice
Period principles from becoming unduly restrictive, whilst allowing an ML holder to make
economic decisions on whether to proceed with accelerated mining operations. At the
same time, it is intended that this mechanism will operate in conjunction with the
compensation principles to defray the cost impact on CSG tenure holders, whose rights to
gas will also be protected through the principles associated with the giving and taking of
ICSG (see section 3.11).
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3.5
Compensation: Context and General Concepts

Compensation principles form only part of the overall proposed framework and
have been designed to incentivise negotiated outcomes.

Compensation for lost CSG production payable only in relation to overlapping
production tenements (i.e. MLs over PLs).

No compensation outside of relevant Notice Periods, except related to Major Gas
Infrastructure and certain Major ATP Infrastructure.

Where Notice Periods are truncated, compensation payable for:

lost CSG production (i.e. gas that would have been produced during the
Notice Period but for the acceleration of mining); and

relocation of Major Gas Infrastructure and Minor Gas Infrastructure.
3.5.1 Context
The overall proposed legislative framework provides significant benefits to both
industries, but will also involve areas of increased cost and risk.
Although important, compensation is only part of the overall package of benefits, tradeoffs and incentive levers which comprise the 'whole package' of proposed reforms.
The compensation principles proposed here are therefore intentionally not designed to
provide comprehensive compensation for every potential increased cost or loss that a
CSG tenure holder may face; likewise there is no proposal for compensation to be paid to
coal tenure holders for potential sterilisation of coal or impacts on cost or efficiency of
future coal mining as a result of prior CSG activities.
Rather, the focus is on a compensation framework that will underpin and incentivise
parties to negotiate outcomes that result in efficient production of both resources, but
which is still workable and equitable if such agreement cannot be reached.
3.5.2 General Concepts
It is proposed that compensation be payable in certain cases for lost CSG production plus
certain gas infrastructure relocation costs, where an ML overlaps a PL. Compensation for
ATPs is dealt with in section 3.9.1.
As a general proposition, compensation will not be payable by an ML holder unless an
Acceleration Notice has been issued, except where Major Gas Infrastructure is required to
be relocated (see further section 3.7).
However, where any Notice Period is truncated, the PL holder would be compensated for
lost CSG production attributable to the truncated period, as well as relocation costs for
Major Gas Infrastructure and Minor Gas Infrastructure (e.g. wells, gathering lines).
This approach establishes an inverse relationship between the length of notice which has
been given by the ML holder and the compensation payable to the PL holder, with the
amount of compensation declining as notice increases.
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The rationale for this approach is that the impact on CSG production is likely to be
significantly less where there has been reasonable opportunity for the gas to be
extracted (see discussion regarding adequacy of Notice Periods in section 3.4.1). As the
PL holder is aware that there is a defined 'production window' in which to extract the gas,
gas that is not extracted within this window will not trigger an entitlement to
compensation. However, it is appropriate that where the ML holder elects to accelerate
mine development (thereby truncating the PL holder's ability to maximise gas extraction
in the defined window), compensation will be payable for lost CSG production that would
have occurred but for the acceleration of coal mining.
While the general position is that compensation will not be payable for lost production
outside relevant Notice Periods, a PL holder will still have avenues to take gas from the
area of overlap subsequent to the expiration of Notice Periods. This may partly be
achieved through the PL holder's first right of refusal to ICSG (see section 3.11.2).
As discussed below in section 3.6.4, an alternative to the payment of compensation
would involve agreed initiatives to minimise the impact of mining on CSG production
(e.g. by investing in measures to accelerate the extraction of gas pre-mining). Taking
into account the added benefits of minimising fugitive mining emissions, it may be
preferable for the miner to pay for accelerated CSG production or reconfiguration of well
fields up-front, rather than to pay in arrears for lost CSG production.
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3.6
Compensation: Lost Production

Compensation for lost CSG production to be based on a hierarchy of preferences:
(in descending order) mitigation of loss, replacement gas and then financial
compensation.

Compensation to be assessed at the time of abandonment on the basis of general
principles of loss-recovery, but payable at the time production would have
occurred (or as otherwise agreed).

Independent expert determination of quantum and certification of production
profiles.

Methodology for calculating lost CSG production to be determined by specialist
technical working group.

Loss mitigation and 'make good' mechanisms available by agreement including
accelerated gas recovery, giving of ICSG and swaps.

Replacement gas must be available on a 'like-for-like' basis to offset compensation
liability (unless otherwise agreed).

Financial compensation for lost CSG production to be calculated by reference to
market cost of replacement gas.
3.6.1 Nature of Compensation for Lost CSG Production
Where a compensation liability arises, it is proposed that the nature of the compensation
payable by the ML holder should be of either replacement gas or some alternative order
of compensation that is financial, although loss mitigation should be the primary goal of
both parties. The process for determination of lost production (including the form and
quantum of compensation), should be structured so as to be finalised concurrently with
abandonment of the IMA or RMA and the expiration of the 18 month period associated
with the relevant Confirmation Notice.
The Working Group acknowledges that in order to meet contractual obligations under
supply arrangements, the CSG industry is likely to express a preference for any
compensation to take the form of replacement gas. However this will not always be
viable or practical.
The Working Group therefore proposes a hierarchy of preferences for compensation:

In the first instance, both the ML and PL holders should attempt to avoid lost CSG
production through appropriate and disciplined planning as well as through
opportunities to accelerate gas recovery. There may be opportunities for the ML
holder to subsidise accelerated activities in anticipation of future mining operations
which will mitigate gas losses. The ML holder will be incentivised to do so in order
to reduce their own potential future carbon liability, as well as to reduce any
potential compensation liability to the CSG party (see section 3.6.4).
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
Where loss mitigation is not possible, or has been unable to completely offset
potential lost production, the next preference would be for compensation to take
the form of replacement gas where technically and commercially feasible for the
parties. This replacement gas may be sourced by the ML holder and provided to
the PL holder or may otherwise be provided through opportunities to 'make good',
if acceptable to the CSG party, acting reasonably (see section 3.6.5).

The final preference is that compensation is of a financial nature. The value of the
lost gas would then be assessed on the basis of the market cost of purchasing
replacement gas offset by avoided production costs (see section 3.6.6).
The Working Group believes that this approach provides comfort to the CSG industry that
gas will be made available where possible and ensures that the compensation regime is
not unduly restrictive from the perspective of the coal industry. It is also believed that
this structure will ensure the most fair and equitable outcome possible and best reflects
the interests of both industries.
3.6.2 Calculating Quantum of Lost Production
Lost Production for Which Compensation is Payable
As noted in section 3.5.2, compensation for lost CSG production will not be payable by an
ML holder except where an Acceleration Notice has been given.
However, where any Notice Period is truncated, the PL holder would only be
compensated for lost CSG production attributable to the truncated period (e.g.
production that would have occurred in years 6-10, but for an acceleration of mining
operations taking effect in year 5 – see Figure 5 below.)
Figure 5 - Producing PL and Acceleration Notice. This diagram illustrates the lost
CSG production in the 'tail' which does not attract compensation plus the compensation
for lost production in the truncated period where an Acceleration Notice is given reducing
the Notice Period by 5 years.
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In this sense, lost CSG production means gas that might otherwise have been produced
from within an area of sole occupancy during the period of truncation, but for the
acceleration of mining activities requiring the PL holder to abandon the area prior to the
expiration of the relevant Notice Period.
Time for Calculation of Lost Production
It is proposed that compensation payable by the ML holder is to be assessed at the time
of abandonment (i.e the date at which acceleration occurs and the PL holder is excluded
from the relevant area of overlap) on the basis of general principles of loss-recovery. The
date of abandonment is the appropriate time for assessment so as to minimise any under
or over compensation if gas extraction is faster or slower than forecast during the Notice
Period. Nevertheless, any up-front investment required for agreed measures to mitigate
loss would need to be taken into account in assessing any residual compensation liability.
Evidence of Lost Production
The amount of compensation (whether in the form of replacement gas or the cost of
obtaining replacement gas) for lost CSG production during the truncated period will also
be dependent upon the nature of, or prospect of, production being conducted or
proposed.
That is, the onus will be upon the PL holder seeking compensation to show that it had the
capacity and intention to produce the amount of gas for which recovery is sought. Where
there is no evidenced capacity or intention to produce, no compensation liability will
arise. The PL holder will also need to have clearly documented production plans showing
the planned production profile, so that timing of compensation can match to the
production profile or as otherwise agreed by the parties.
Calculating the quantum of lost CSG production would therefore require evidence of the
output and production profiles of wells to which the compensation liability attached. This
means that where an ML is granted over an operating PL, compensation would be readily
determinable with reference to up-to-date production profiles to extrapolate the
reduction of gas able to be extracted as a result of the acceleration of mining activities.
In relation to delayed production PLs, refer to the discussion at section 3.6.3.
Expert Certification and Determination
Because of varying levels of uncertainty in demonstrating the quantum of any lost CSG
production, it is suggested that a mechanism requiring independent expert determination
of the quantum of compensation and certification of production profiles (unless the
parties agree otherwise) be included to ensure that calculations based on such data are
appropriate and fair to both parties (see section 3.15).
Offsets for Costs Avoided
If the form of compensation received by the CSG party results in avoided production,
processing or transportation costs, there should be an appropriate offset.
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Further Work Required
The methodology to be used in determining production profiles and the quantum of
compensation for lost CSG production remains to be considered, but would need to be
grounded in defensible economics and comparative data.
The Working Group has proposed the basic principles of compensation, but it is
appropriate that a technical group of specialists work through the issues around the
formulation of a methodology to be applied by an independent expert to determine
production profiles and assess compensation for lost CSG production. This process would
result in calculation guidelines or regulations to supplement the broadly applicable
legislative principles which are proposed in this report.
3.6.3 Compensation for ML Over Delayed Production PLs
In the circumstances of an ML over a delayed production PL, compensation principles
would still apply because gas reserves have been proven up in order to obtain grant of
the PL and will (as per existing requirements for grant under the P&G Act) be subject to
relevant arrangements for the sale of the CSG. The ML holder would therefore still be
liable to compensate for any lost CSG production during any period of truncation.
In accordance with the general principles which have been outlined above in relation to
Notice Periods and the calculation of lost CSG production, the production profile for a
delayed PL would be calculated from the point at which any gas production commenced
(see Figure 6).
Figure 6 - Delayed Production PL. This diagram illustrates the situation where the full
10 year Notice Period is provided and the PL holder responds by bringing the relevant
area into production earlier than planned, resulting in wells on production within 2 years.
The production curve is then 'pushed out' by the 2 years it takes to get production on
stream so that the PL holder only gets 8 years production (i.e. there is 2 years of
production loss that is not compensable).
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However, where the PL holder can demonstrate (and this is independently certified) that
as a result of the acceleration, it is no longer economic to commence production, then
compensation will be calculated by reference to lost production over the whole of the
Notice Period claimable from the date that the Acceleration Notice was effective. As there
may only be test production data in such a delayed scenario, independent certification
and determination of lost production on the basis of analogous type curves (derived from
exploration data for the area in question, including any information provided by the ML
holder) would be required through the mechanisms discussed above in section 3.6.2. Any
assessment of compensation for such lost production would also need to deduct avoided
costs to ensure payments were fair and equitable.
Figure 7 - Delayed Production PL where ML holder serves an Acceleration
Notice. This diagram illustrates the situation where an Acceleration Notice is given at
year 0, truncating the Notice Period to 4 years, and it is proven that it would not be
economic to commence production if there is only going to be 4 years of production
before abandonment is required (4 years is only an example). Compensation would then
be calculated on the production curve for the whole of the Notice Period, but claimable
from the date that the Acceleration Notice is effective.
PL holders will be motivated in a delayed production scenario to commence production as
soon as possible as whatever gas has not been extracted from the tail of the production
curve at the end of the initial 10 year Notice Period will be lost without compensation
entitlement, and binding commitments under sales contracts will drive accelerated
extraction from the moment the Notice Period commenced to ensure the availability of
gas to meet demand. Similarly, any compensation liability would need to be considered
against the ability of the ML holder to 'make good' which would have the potential to
substantially reduce liability in this situation (see section 3.6.4). The onus would also
remain with the PL holder to show that it was uneconomic to commence production as a
direct result of the acceleration of mining, or else compensation rights would be
diminished.
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Given the necessity of pre-mine drainage and fugitive emissions management in some
circumstances, ML and PL holders may in some cases negotiate alternative arrangements
whereby the ML holder contributes to the capital expenditure of facilitating the
commencement and/or acceleration of CSG production as a way of offsetting
compensation liability.
3.6.4 Mitigation of Compensation Liability
The general position adopted by the Working Group is that compensation for lost CSG
production should take the form of replacement gas wherever possible. As a logical
consequence, any ICSG or other replacement gas accepted should offset compensation.
It is therefore proposed that legislative reforms should recognise good faith processes to
minimise compensation through opportunities to 'make good' which are acceptable to the
CSG party (acting reasonably) by providing replacement gas on a 'like-for-like' basis.
This will allow for maximum resource extraction but also provides a mechanism for the
management of the ML holder's compensation liability. It would also operationalise
compensation in the form of replacement gas by encouraging parties to cooperate and
seek innovative means of ensuring the overlapping PL holder can maximise gas
production.
Examples
Specific examples of ways in which an ML holder may mitigate its compensation liability
include the following:
 the ML holder may permit producing (or planned) CSG wells to remain within the IMA
(if it is safe to do so), whether as part of a swap or on a single-tenement basis;
 the ML holder may fund accelerated gas recovery (or resequencing of gas production
within the affected PL, if possible);
 the ML holder may offer Undiluted ICSG (see section 3.11.4);
 the ML holder may offer Diluted ICSG, which is accepted by the overlapping PL holder
with an associated offset equal to the calorific value of the Diluted ICSG offered and
accepted (see section 3.11.4); or
 the ML holder may provide equivalent replacement gas (bought on market or provided
from elsewhere).
One avenue for 'making good' and mitigating a compensation liability will be through the
offering of ICSG (see section 3.11). The Working Group proposes principles for the
offering of ICSG to an overlapping petroleum tenement holder which will (at least
partially) offset compensation where it is being provided on a 'like-for-like' basis (i.e.
similar quality to what would have been produced had the PL holder continued with
extraction). ML holders may also be entitled to use the giving of ICSG in one area as an
offset to liabilities in another area provided the same entity holds the relevant tenure and
agrees to the offset (see section 3.11.4). Rights to ICSG on a cost-sharing basis also
provide the CSG tenure holder access to gas beyond that which may be regarded as lost
production (i.e. gas produced outside of Notice Periods).
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Other creative ways in which lost gas may be minimised is through the synchronisation
and co-ordination of pre-mine drainage (see section 3.10), adequate information
exchange (see section 3.2.3) allowing a PL holder to continue extraction in circumstances
of delay, as well as 'land-swaps', namely the offer of an alternative area to the CSG
tenure holder, or the opportunity to remain in an existing area for a longer period, in
exchange for the ML holder accelerating in another area. (e.g. this may have application
where there are multiple IMAs in an ML or in relation to mineral hydrocarbon leases
('MHLs') in the Bowen Basin).
3.6.5 Provision of Replacement Gas
The Working Group acknowledges that in order to meet contractual obligations under
supply arrangements, the CSG industry is likely to express a preference for compensation
to take the form of replacement gas. This is especially true for CSG to LNG projects
which have long term supply arrangements.
However, as a general rule, in order to be able to effectively offset the lost production
(and thereby satisfy any compensation liability), the replacement gas must be available
and useable on a 'like-for-like' basis. As the default position (but noting that parties
would be free to negotiate bespoke arrangements), this would require the replacement
gas to be the same in terms of:

Timing. The replacement gas would need to be provided in a similar timeframe to
the timeframe in which the 'lost gas' was planned to be produced. This would be
determined by reference to the PL holder’s production plans.

Delivery Point. Replacement gas will not be suitable if it is made available at a
distant location without any means to transport it to where the PL holder requires
it. Therefore, as a basic proposition, either:


the ML holder would need to pay the costs of transportation and
compression required to deliver the replacement gas into the PL holder's
gas distribution and/or transmission system, noting that the replacement
gas needs to be made available at an off-take point where the PL holder has
collection/transmission infrastructure; or

the ML holder would need to pay for the additional delivery costs to enable
the PL holder to take it on a 'like-for-like' basis.
Quality. The replacement gas quality must be on a 'like-for-like' basis, unless
otherwise agreed. However, both parties will be obliged to act reasonably in
ensuring that, where technically and commercially feasible, replacement gas can
be supplied into the PL holders’s gas portfolio that would maximise its economic
efficiency.
In many circumstances it is expected that it will not be possible for the ML holder to
achieve all of the above criteria.
Accordingly, there needs to be an obligation on the PL holder to consider in good faith
any proposals which are made by the ML holder to 'make good' on lost CSG production
that would otherwise be compensable.
3.6.6 Financial Compensation for Lost Production
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The proposed framework is intended to align with general principles of compensation, in
which payments fall due within the period the losses would have been sustained (i.e.
after abandonment).
The Working Group proposes that details of payment of compensation are to be a matter
for commercial negotiation among the respective parties. This will give the parties the
flexibility to finalise arrangements which are suitable to individual circumstances and
readily allows for compensation to be made in the form of either replacement gas or
financial reimbursement (or a combination of the two).
However, the default position is that in the event a compensation liability arises and an
agreement cannot be reached in relation to mitigation or replacement gas, financial
compensation will be paid and will be paid at the time the lost production would have
occurred.
Calculation of Financial Liability for Lost CSG Production
Financial liability for any lost CSG production would be calculated by reference to the
market cost of a corresponding quantity and quality of replacement gas as at the time it
would have been produced, offset by production costs actually avoided by the PL holder
in producing the gas.
The market cost of replacement gas needs to allow for:

a delivery profile for replacement gas over time to maintain the PL holder’s
production curve;

the costs of transportation and compression required to deliver the replacement
gas into the PL holder’s gas distribution and/or transmission system;

if replacement gas is conventional gas, costs of treatment (if available) to meet
the PL holder’s pipeline and plant specifications;

in the event that replacement gas is not available, then the PL holder can be
compensated for the cost of LNG replacement cargoes at market rates; and

the liquidity of the Eastern Australian gas market and likelihood of availability of
replacement gas.
The PL holder will have to use reasonable endeavours to achieve the lowest-cost
outcomes on a 'like-for-like' basis negotiated at arms-length.
Timing - Staggered vs Lump-Sum Payments
The Working Group suggests that an effective payment structure for financial
compensation would be for payments to be made in tranches following assessment (e.g.
quarterly, semi-annually or annually, in line with production forecasts from the
abandoned wells, or as otherwise agreed), which would allow for the management of
credit support arrangements. Staggered payments would also provide the CSG industry
with the degree of comfort required for lost production.
While a payment structure aligned with the production profile of the lost CSG production
would be the default, it would be open to the parties to agree to an up-front lump-sum
payment, which has been discounted to reflect the fact that the timing of payment has
been brought forward (via a net present value calculation).
Example
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Mine Co. has elected to truncate the Notice Period by 5 years over Gas Co.'s producing
PL which includes operating and proposed wells, as well as Major and Minor Gas
Infrastructure. In structuring its compensation payments, Mine Co. may be required to
time such payments in the following manner:
 For the existing CSG wells: compensation would be calculated at the time of
abandonment. Compensation for lost production would be paid periodically reflecting
when the production would have occurred.
 For proposed CSG wells not constructed: compensation would be calculated at the
proposed time of abandonment using production profiles determined by an
independent expert. Payments would be made periodically at a time when production
would have otherwise occurred, by reference to the PL holder’s production plans as at
that date.
 For Major and Minor Gas Infrastructure: compensation will be payable in
accordance with any relocation arrangements that are agreed between the parties.
This is likely to involve progress payments and a payment on practical completion.
3.6.7 Reconciliation for Subsequent Recovery of Lost Production
As discussed in section 3.6.2, there may be opportunities for a PL holder to produce gas
from an area which is no longer subject to the sole occupancy of the ML holder. Any such
future CSG production would be dependent upon whether the gas can technically be
extracted (e.g. it may no longer be possible to drill through the area as a result of mining
activities) and whether it is economic to do so (e.g. it may not be viable to establish a
single well in an otherwise decommissioned gas field at some future point). This will be
especially relevant in scenarios where the PL holder is targeting seams that are deeper
than those which were mined.
In these circumstances, compensation for lost CSG production would have been paid
upfront as at the time of abandonment. However, where the PL holder subsequently
recovers the gas, an appropriate reconciliation should be made.
While the precise methodology of the reconciliation would be a matter for development
by technical experts, the Working Group submits that the reconciliation should:

be in respect of the lesser of the quantity of gas subsequently produced and the
quantity of gas which was the subject of compensation;

take into account the time value of the compensation originally paid; and

take into account any increased costs of production associated with the gas
subsequently produced.
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3.7
Compensation: Affected Major Gas Infrastructure
 The ML holder will be liable for costs of replacing and relocating Major Gas
Infrastructure which will be directly physically affected by mining activities (i.e Major
Gas Infrastructure which is located within a proposed IMA, FMA or SOZ).
 The CSG tenure holder will not be required to abandon Major Gas Infrastructure unless
and until replacement infrastructure is constructed, commissioned and operational.
3.7.1 Definition of 'Major Gas Infrastructure'
'Major Gas Infrastructure' comprises Gas Facilities not included in Field Assets and
consists of the following:

all infrastructure constructed under a petroleum facility licence ('PFL') or a
petroleum pipeline licence ('PPL');

field/nodal compressors;

central processing plant/hub compressors;

pipeline compressors;

gas processing, storage, reinjection or treatment facilities;

water processing, storage, reinjection, dehydration, desalination or treatment
facilities;

utility systems to support gas activities (e.g. power generation or transmission);
and

significant infrastructure necessarily associated with the above such as
accommodation camps, major roads, communications facilities; workshops, stores
and offices.
Major Gas Infrastructure also includes equipment and facilities used by the CSG tenure
holder or any third party infrastructure provider acting for the benefit of the CSG tenure
holder, to carry or transmit gas, water or other substances, telecommunications and
electricity, other than gathering lines upstream of field/nodal compressor stations.
This list of infrastructure constituting Major Gas Infrastructure will require further
refinement and detail from a technical working group (see section 4.4).
3.7.2 No Abandonment Until Replacement Facility Constructed
In circumstances where there is an existing PL that is subsequently overlapped by a ML,
with the result that the ML holder requires Major Gas Infrastructure to be moved from
within an IMA, FMA or SOZ, or the Major Gas Infrastructure will be directly physically
affected by the ML holder’s mining activities such that it will not be able to safely or
efficiently operate as intended:
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
in order to ensure no interruption to its operations, the CSG tenure holder will not
be required to abandon the Major Gas Infrastructure or the associated IMA, FMA
or SOZ (and the ML holder will not be able to obtain an IMA, RMA or SOZ over the
area on which it is located) unless and until a replacement facility is constructed,
commissioned and operating;

the CSG tenure holder will manage the relocation and replacement of the Major
Gas Infrastructure but the ML holder will have a right of approval prior to the
award of any tender or execution of the construction contract; and

the ML holder will bear all the CSG tenure holder’s actual costs of the
relocation/replacement of the Major Gas Infrastructure.
The above approach is generally consistent with the existing practice for relocation of
major network infrastructure. However, further detail will be required to ensure that:

the CSG tenure holder is under an obligation to act reasonably to seek to manage
costs of the replacement facility, and to ensure it is constructed and commissioned
in a reasonable time; and

replacement is on a 'like-for-like' basis. The ML holder should not be required to
incur additional costs because the CSG tenure holder wishes to construct a new
facility with additional capacity or different specifications. This would need to take
into account factors such as the availability of replacement plant and equipment,
as well as regulatory and environmental requirements.
3.7.3 Compensation for Stranded Assets
Treatment of stranded assets resulting from the exercise of the coal 'right of way' is to be
considered further by a technical working group (see section 4.4).
3.7.4 Mitigation Incentives and Opportunities
The aim of the consultation and information exchange requirements proposed as part of
the general principles relating to the Rolling Abandonment Model (see section 3.3.6) is to
reduce the compensation liability for gas infrastructure by providing both parties with the
mechanisms to plan around infrastructure requirements, especially given the costs and
delays which are likely to be associated with relocating Major Gas Infrastructure. Parties
may also agree to leave infrastructure in place if it facilitates pre-mine drainage, ICSG
extraction or the drainage of seams not affected by mining.
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3.8
Compensation: Affected Minor Gas Infrastructure
 Compensation for affected Minor Gas Infrastructure will only be payable by the ML
holder in circumstances where the relevant Notice Period has been truncated.
 Compensation for Minor Gas Infrastructure will be based on the depreciated value of
that infrastructure.
'Minor Gas Infrastructure' means all Field Assets not included in the definition of Major
Gas Infrastructure provided above, and would include:

pilot or producing gas wells;

sub-nodal collection networks;

minor access roads and tracks;

facilities and infrastructure associated with, and servicing, the above; and

minor facilities associated with, and servicing, Major Gas Infrastructure, where the
Major Gas Infrastructure itself does not require relocation.
This list of infrastructure will also require further refinement by an appropriate group of
technical experts (see section 4.4).
Since Notice Periods will allow the CSG tenure holder to extract the bulk of production
and economic benefit of the Minor Gas Infrastructure, compensation will not be payable
by the ML holder for the relocation or removal of Minor Gas Infrastructure outside a
Notice Period.
The ML holder will be liable for payment of compensation in respect of both Minor and
Major Gas Infrastructure where the Notice Period has been truncated on the basis that
the PL holder has not had the full enjoyment of the Notice Period to make preparations.
The compensation payable for Minor Gas Infrastructure in those circumstances would be
based on the depreciated value of that infrastructure at the date of abandonment.
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3.9
Compensation: Other Compensation-Related Issues
 The ML holder will be liable for compensation where an IMA is to be located over Major
ATP Infrastructure.
 Where an ML is granted over an ATP, and a PL is subsequently granted, the basic
principle of compensation for lost CSG production as a result of a truncated Notice
Period will apply.
 Where gas extraction is accelerated ahead of the formation of an IMA, incremental
costs of acceleration will be payable by the party who elects to accelerate such
recovery.
 The ML holder will be liable for any additional costs which the PL holder incurs as a
result of reliance upon an Acceleration/Confirmation Notice in circumstances where
mine development is delayed (other than in circumstances beyond the control of the
ML holder acting reasonably) .
3.9.1 Compensation for ATP holders
The Working Group considers that compensation rights for lost CSG production should
not be extended to exploration tenure as there is no right to produce.
The Working Group acknowledges that an ATP may represent a significant investment
which has not yet matured. However, under the current legislative regime, ATPs are
susceptible to having MLs granted over them, without any compensation being payable,
and the grant of such MLs would give the ML holder veto rights to future PLs over the
entire area of the ML. To that extent, the Working Group believes that ATP holders would
be substantially better off under the proposed regime contemplated in this report for the
following reasons:

while compensation will not be extended for lost CSG production, an ATP holder
will be given rights to ICSG (see section 3.11);

an ATP holder will receive the benefit of mechanisms for facilitating the grant of a
PL for pre-mine drainage (see section 3.10);

the decoupling of grant of tenure will mean that an ATP holder will have a clear
path to grant of a PL, even where overlapped by a ML (see section 3.2.1);

the ATP holder will continue to have rights of access to areas within an overlapping
ML which are outside the ML holder's area of sole occupancy (see sections 3.2.2
and 3.3.5); and

the ATP holder will be relived from relinquishment obligations and work program
requirements to the extent of any area of sole occupancy (see section 3.2.2).
Further, it is proposed that where an IMA is to be located over Major ATP Infrastructure
(i.e. pilot wells and associated infrastructure) compensation will be payable for the
depreciated value of the infrastructure. No compensation will be payable if the Major ATP
Infrastructure had been, or was planned to be, abandoned.
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Nevertheless, where an ML is granted over an ATP, and a PL is subsequently granted, the
basic principle of compensation for lost CSG production as a result of a truncated Notice
Period would apply. There would be no compensation for lost production as a result of
existing mining operations where the IMA/RMA have been established, but compensation
rights would attach to any truncation of the rolling Notice Periods (see section 3.4.1).
Example
Mine Co. is granted an ML over the area of Gas Co.'s ATP in 2013. After giving an 18
month Confirmation Notice, the IMA takes effect and Mine Co. begins coal mining
operations. No compensation is paid to Gas Co. upon the formation of the IMA. Both
entities meet each year to discuss development plans and exchange information on coal
mining and gas exploration operations which are being conducted in the area of overlap.
In 2015, Gas Co. is granted a PL over the area of Mine Co.'s ML and may therefore
conduct gas production activities outside of the IMA. Two wells are subsequently sunk in
an area that (according to Mine Co.'s date-stamped Mine Plans) would not be subject to
mining activities until 2024 (i.e. in the area of the first panel of the RMA). Mine Co.
subsequently conducts coal mining operations at a faster rate than initially expected and
issues an Acceleration Notice that it will expand the IMA into the first panel of the RMA
(i.e the area where Gas Co.'s wells are located) in 2020. Mine Co. would compensate Gas
Co. for the lost CSG production over the period 2020-2024 as well as for any affects to
major or minor gas infrastructure in that area.
This approach incentivises conversion to a PL as soon as notification of an MLA is made
as any delay in seeking a production tenure will result in greater non-compensated lost
gas (although future opportunities to recoup losses exist through rights of first refusal to
ICSG). Opportunities for an ATP holder and an ML applicant to implement synchronisation
of pre-mine gas drainage therefore become very important in ensuring maximum
resource exploitation in these circumstances. Opportunities for such synchronisation, and
mechanisms for facilitating the grant of PLs for pre-mine drainage, are discussed below in
section 3.10.
3.9.2 CSG Small Capital Exploration Industry Position on Compensation
The Working Group engaged with representatives of the CSG small capital exploration
industry ('CSG Small Caps') in the preparation of this report. The CSG Small Caps were
also represented on the Working Group by APPEA and were directly consulted as part of
the process discussed in section 1.4.
The text box below includes a statement prepared by the CSG Small Caps noting their
views.
From the CSG Small Capital Exploration Companies
"CSG Small Capital Exploration Companies have reviewed the QRC Joint Coal & CSG
Working Group on Overlapping Tenure: Detailed Briefing Paper released for consultation
on 6 February 2012. This proposal does not address the issues on compensation
adequately for the small capital exploration industry.
During the consultation over the industry (green) paper in early 2012, CSG explorers
expressed immediate concern that the draft proposal was predicated on having a
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diversified portfolio of tenures which would allow a coal seam gas company to manage
the impact of a coal 'right of way'. For many of these companies with a small number of
exploration tenures, there was real concern at the material impact on the value of the
tenure and hence the company.
The Queensland Government grants the right to explore for CSG and these rights should
be protected. Companies with small portfolios are unable to adequately manage the
tenure risk if they have a limited number of assets under the current proposal. Therefore,
companies with small market capitalisations will be materially impacted by surrendering
an asset. Inadequate compensation makes future ATPs 'uninvestable' and will slow CSG
exploration investment in Queensland.
The compensation principle for CSG exploration should be based on value, not cost
recovery and future work programmes and relinquishments should take into account and
adjust programs for exploration companies for surrendering assets.
The CSG Small Caps believe the Overlapping Tenure proposal is based on:
 large CSG companies that have large PL and ATP portfolios and very long life
production projects which allow flexibility;
 simple subsurface geologic structuring;
 current day gas market conditions and contracting;
 current day technologies; and
 one size fits all.
The above issues are likely to change in the future, and the future is where the CSG
Small Caps focus investment into our tenures including ATP’s, PLA’s and PL’s. Using the
current default model in future small PL’s will restrict the small CSG producers as they
cannot commit to long term gas supply contracts if they do not have certainty of being
able to deliver to those contracts. Lack of supply certainty will have a negative impact
on both gas supply contract terms and project financing, affecting CSG project
economics
While the negotiations to date were conducted in good faith, the CSG Small Caps have
asked that their preferred principle of compensation for our tenures be explicitly included
in the revised industry (white) paper as a place marker. The CSG Small Capital
Companies seek to be part of any further government processes on overlapping tenures."
3.9.3 Costs for Accelerated Gas Recovery
As a result of the notification of an IMA, a PL holder may choose to accelerate production
to maximise gas extraction prior to mining activities. Similarly, it may be cost effective
for an ML holder to facilitate accelerated gas recovery rather than incur a compensation
liability. Where the PL holder has incurred additional costs in order to accelerate gas
recovery in reliance upon information given by the ML holder (which is confirmed by the
PL holder), these costs will have been unnecessarily incurred should the IMA be
established later than the dates specified in those notices.
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The following table summarises allocation of costs for accelerated recovery in different
situations.
Situation
Party to Pay Costs
ML holder chooses to accelerate gas
recovery to reduce compensation liability.
ML holder pays incremental cost of
acceleration.
PL holder elects to accelerate gas recovery.
PL holder pays incremental cost of
acceleration.
ML holder elects to delay mine
development beyond date of
Acceleration/Confirmation Notice (other
than in circumstances beyond the control of
the ML holder acting reasonably).
If PL holder has incurred additional costs in
response to original
Acceleration/Confirmation Notice, the ML
holder reimburses gas for those expenses.
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3.10 Synchronisation of Pre-Mine Drainage

Opportunities for proponents to synchronise drainage of mine pathway ahead of
mining operations.

Parties incentivised, but not mandated to co-develop.

Mechanism to allow sharing of information between ML applicant and ATP holder to
facilitate grant of PL for pre-mine drainage.

Holder of PL granted for pre-mine drainage able to defer production development
if the related mine development does not proceed as scheduled.
3.10.1
Co-development Opportunities
The Working Group acknowledges that the drainage of gas from the mine pathway ahead
of mining operations will facilitate greater resource exploitation, as well as fugitive
emissions minimisation, which will mutually benefit both coal and CSG tenure holders.
Co-development arrangements between overlapping and adjacent coal and CSG tenure
holders should be a matter for voluntary agreement based on market forces, the
exchange of project plans, and the existence of project specific opportunities. The
efficiency of co-development can however be enhanced by the adoption of measures to
enable CSG pre-drainage of the mining pathway to be synchronised with mining
development, although this is not a mandated default principle.
The Working Group proposes that negotiated agreements as to synchronisation can be
achieved by facilitating the grant of a PL for mine pre-drainage, and by enabling the PL
holder to defer production development if the related mine development does not
proceed as scheduled.
3.10.2
Pre-Drainage of the Mining Pathway
While the encouragement of pre-mine gas drainage allows the CSG party to access and
recover more gas than otherwise possible, the coal party is better able to ensure safe
working conditions in underground mines, minimise fugitive methane emissions that
would otherwise attract a carbon penalty and reduce the quantum of CSG left in the
ground which may impact upon any compensation liabilities. These drivers will be more
pronounced in an underground context, and if an underground mine is being developed
in a gassy coal sequence that is also being drained down-dip by an existing PL operation,
there are additional benefits which may be derived from integrating gas infrastructure.
Pre-drainage ahead of open-cut mining may however also be viable in shallow deposits of
gassy coal.
It will be a matter for overlapping parties to negotiate how pre-mine drainage
commitments are synchronised with mining development (including the alignment of
drainage wells with mining plans), although the overall framework will incentivise codevelopment to facilitate the realisation of shared benefits where possible. It is
conceivable that such arrangements may take the form of funding contributions for a
more rapid and intensive pre-mine drainage program before relevant Notice Periods
expire, with benefits for resource recovery and fugitive emissions mitigation as well as
for mine safety.
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The Working Group considers that where CSG pre-drainage and mining development are
linked, those linkages and their potential benefits should be taken into account in the
grant of related PLs and in the setting of their conditions.
For example, should the mine development not proceed in accordance with the schedule
envisaged at the time the MLA is lodged, the CSG tenure holder may not be in a viable
position to commence production within two years of the grant of any PL which is made
in response to the planned mine development. The Working Group considers that in such
circumstances the PL holder should be permitted to pause CSG development, and notes
that a way of achieving that flexibility could be recognition that a ‘relevant arrangement’
has been established to substantiate deferred production. Provided the ATP holder can
establish available markets to be supplied with the gas (an essential prerequisite), then it
may be possible to rely on gas production planned by the coal miner to meet the
production element of the ‘relevant arrangement’ test under the P&G Act.
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3.11 Incidental Coal Seam Gas

ML holders must make a first right of refusal offer to supply ICSG to overlapping
CSG tenure holders (ATPs and PLs).

ICSG accepted by an overlapping CSG tenure holder will offset compensation
liabilities.

ML holder will be under an obligation of resource optimisation to use reasonable
endeavours where practicable (subject to priority for safe and efficient mining) to
avoid dilution of ICSG and to optimise production of ICSG by aligning Undiluted
ICSG volumes as nearly as practicable with the capacity of gas pipelines serving
the mine.

First right of refusal offer to be made on periodic basis, with initial and subsequent
periodic offers to be made in relation to Undiluted ICSG to be produced from the
IMA (the periodicity of which is the subject of two options identified by the
Working Group), an initial one-off offer for Diluted ICSG produced from the IMA,
and subsequent incremental offers to all ICSG produced from the successive RMA
extensions.

ML holder will be entitled to a contribution to the cost of ICSG production.

Where the first right of refusal offer is accepted, parties will enter mutually agreed
contracts for delivery which include statutorily prescribed terms relating to agreed
volume, quality and deliverability.

Undiluted ICSG which is offered and accepted will constitute an offer to supply
replacement gas which offsets compensation liability. If an offer of Undiluted ICSG
that could reasonably be accepted is not accepted, then compensation liability will
also be reduced.

Diluted ICSG accepted by an overlapping CSG tenure holder will offset
compensation liabilities by the calorific value of the ICSG taken.

Provided the ML holder complies with the obligation of resource optimisation,
where a first right of refusal offer made in conjunction with reasonable ICSG
production cost contribution arrangements is not accepted, the ML holder will be
free to beneficially use the ICSG, including to commercialise it.
3.11.1
General Concepts
As part of the trade-off associated with the 'right of way' principle, it is proposed that an
ML holder must offer any ICSG produced from an area of sole occupancy to overlapping
CSG tenure holders (i.e. both PL holders and ATP holders) at no cost, other than a
contribution to the costs of producing the ICSG. It is intended that this will give CSG
tenure holders access to gas beyond the relevant Notice Periods and will be used as a
mechanism to facilitate the supply of replacement gas to offset any compensation liability
owed by the ML holder as well as assisting in the management of carbon liabilities.
In requiring the ML holder to offer ICSG to overlapping CSG tenure holders, the Working
Group is acknowledging that the basic property rights to gas should reside with the
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holder of the petroleum tenement (including with existing holders of MHLs and ML-PLs)
and that the ML holder has a right to extract ICSG for the purposes which are currently
outlined within the MRA (i.e. as a necessary result of coal mining, to ensure a safe mine
working environment, and to minimise fugitive emissions during the course of coal
mining). However, under the proposed framework, ownership rights to ICSG will be
'forfeited' where the CSG tenure holder does not accept a valid offer to take the gas. This
forfeiture will allow an ML holder to use the ICSG for its own purposes, including
commercialisation.
To account for operational realities and the differing qualities of gas which may be
extracted in conjunction with coal mining activities, it is intended that separate rights to
take ICSG will apply depending on the nature of the gas:

Undiluted ICSG is ICSG that is free of air contamination and will generally be
extracted using surface to in-seam techniques analogous to those that would be
used by CSG tenure holders. Undiluted ICSG will usually be of commercial quality,
but in some localities it may contain naturally occurring carbon dioxide or nitrogen
in excess of commercial specifications. The practical value of Undiluted ICSG, as a
replacement for lost CSG production, is dependent upon the extent to which it is
produced in volumes aligned with the capacity and requirements of the
overlapping CSG tenure holder's gas infrastructure and market.

Diluted ICSG will comprise gas which is extracted using underground in-seam
and goaf drainage techniques under vacuum, resulting in air contamination. The
practical value of Diluted ICSG is limited by its quality (which effectively restricts
its beneficial application to local power generation) and usually by the marked
fluctuations in its volume (which adversely affect the utilisation and economics of
any power generation). Diluted ICSG will therefore usually have minimal value as
a replacement for lost CSG production.

Ventilation Air Methane and other forms of gas containing only trace levels of
methane will be of little utility to CSG tenure holders and have little beneficial
value. There is no intention for such gas to form part of the ICSG first right of
refusal mechanism under the proposed framework.
Given the limited value attributable to Diluted ICSG, the Working Group proposes that an
obligation be included that an ML holder will use reasonable endeavours to minimise any
unnecessary contamination or dilution of ICSG, and where practicable, to maximise the
recovery of Undiluted ICSG. The ML holder will also use reasonable endeavours to
maximise the value of Undiluted ICSG by aligning production volumes as nearly as
practicable with the capacity of gas distribution infrastructure serving the mine.
It is intended that the ability to plan and implement long-term gas drainage to meet such
requirements will be facilitated by the planning coordination and information exchange
obligations discussed in sections 3.2.3 and 3.3.6. Similarly, the supply of information to
overlapping CSG tenure holders relating to gas reserves at the time the MLA is lodged
will provide visibility on ICSG production profiles, although an ML holder should not be
unreasonably constrained by such production plans if circumstances change. To this end,
the Working Group is of the opinion that existing reporting obligations should also be
extended to require ongoing reporting to both the State and any overlapping CSG tenure
holder on the volumes of ICSG actually produced during the life of the mine.
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The off-take of ICSG offers significant benefits to both parties through the sharing of
costs of multi-purpose gas drainage, including mine safety management, fugitive
emissions reduction, mitigation of compensation liability and marketable CSG recovery.
The maximisation of these benefits will require a collaborative relationship and close
cooperation on development planning and information sharing.
3.11.2
First Right of Refusal Mechanism
To give effect to the principle that the ML holder must offer ICSG to overlapping CSG
tenure holders, the Working Group proposes the introduction of a first right of refusal
mechanism.
Under the first right of refusal mechanism, the ML holder will offer supply of ICSG (both
Diluted and Undiluted) to overlapping ATP and PL holders in conformity with the general
obligation of resource optimisation and in conjunction with reasonable terms for
contribution to the costs of ICSG production. To account for the changes to development
plans which may be required where acceptance occurs, the making of an offer to supply
must be made in advance of the availability of the ICSG. Sufficient time periods will also
be required to allow for the CSG tenure holder to consider and respond to the offer and
for the ML holder to implement contingencies in the event that the CSG tenure holder
declines or does not respond to the offer. The Working Group considers that the CSG
tenure holder should have 12 months in which to accept or reject an initial offer, and
subject to the timely provision of regulatory approvals will probably require further 2
years to implement the off-take. The offer would also need to include sufficient detail to
enable the ATP or PL holder to properly assess potential volumes and quality, as well as
their variability over time.
As the Rolling Abandonment Model means ICSG will be extracted from differing areas as
the mine face advances, it is proposed that offers for the supply of ICSG be made on a
periodic basis depending upon the nature of the gas and the area to which the offer
relates.
An initial first right of refusal will therefore be made for the ICSG contained within the
IMA. So as to align with pipeline development opportunities, it is intended that unless
otherwise agreed by the overlapping parties, the offer to supply Undiluted ICSG from the
IMA be made on a periodic basis (examples for which are set out below). By comparison,
Diluted ICSG which is planned to be produced from the IMA should be made on a onceoff basis. The reason for such a distinction is that in circumstances where Diluted ICSG is
not accepted by the overlapping CSG tenure holder, it may be used to underwrite nearsite utilisation (e.g. power generation). The periodicity of any offer for Diluted ICSG
would therefore be constrained by the need to assure long-term supply in such
circumstances.
Subsequent first right of refusal offers will also need to be made in relation to each
incremental panel of area corresponding to the RMA and would include any gas not
previously accepted for which the ML holder had not 'established' a beneficial use (see
section 3.11.5). In these circumstances it is not proposed to distinguish between
Undiluted and Diluted ICSG for frequency of offer purposes, as the period to which the
offer would relate is already finite (i.e. annual offers would be made in line with the panel
area).
Where a first right of refusal offer is accepted, the ML holder will be entitled to a
reasonable contribution to the cost of ICSG production from the overlapping CSG tenure
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holder, taking into account the costs and benefits that each party would otherwise incur
in the absence of the ICSG off-take. As discussed in section 3.12, carbon and royalty
liabilities will follow any component of ICSG which is accepted. Any saved carbon costs
would be a factor to be considered in the cost/benefit analysis, but will not operate as a
full offset.
3.11.3
Contract for Delivery
Upon acceptance of a first right of refusal offer, it is proposed that the parties will enter
into a contract for delivery of the ICSG based on the principles outlined in this section
3.11.3, which would form statutory criteria for the creation of such contracts.
Nevertheless, the parties will remain free to come to alternative arrangements (see
section 3.2.4).
In setting the defaults for such contracts of delivery, it is proposed that the parties will
be required to negotiate for either class of ICSG to be supplied on an agreed volume,
quality and deliverability basis to align with the disposal facilities provided by the CSG
tenure holder. It is anticipated that the planning engagement required to achieve this
outcome will be supported by the information exchange requirements discussed above in
section 3.11.1.
Any ICSG offered to the petroleum tenement holder will then be offered at a single
transfer point for each class of ICSG. The cost of transferring the gas from that transfer
point to the CSG tenure holder's facilities is to be borne by the CSG tenure holder.
In the event that the CSG tenure holder accepts an first right of refusal offer on agreed
volumes, qualities and delivery but is unable to take the gas, then the ML holder will be
entitled to recover the costs it incurs in disposing of such gas (including the carbon costs,
royalties and any essential capital investment it makes in facilities to deal specifically
with this contingency).
3.11.4
Relationship with Compensation Principles
As a general proposition, it is proposed that ICSG which is offered by the ML holder, and
accepted by an overlapping CSG tenure holder, will offset compensation liabilities.
It is intended that the principle relating to the mitigation of compensation liabilities will
be applicable to offers to both overlapping ATP and PL holders. In this sense, ML holders
will be entitled to use the giving of ICSG in one area as an offset to liabilities in another
area provided the same entity holds the relevant tenure and the gas qualities are of a
similar nature which will not materially disadvantage the CSG tenure holder. Such offsets
will apply in the following circumstances:

where there is an ML over a PL and there is compensation liability for the
acceleration of mining activities;

where there is an ML over a PL and relevant Notice Periods have been observed
and a compensation liability exists in relation to another overlap between the
parties; and

where there is an ML over an ATP and a compensation liability exists in relation to
another overlap between an ML and a PL held by the parties provided the CSG
tenure holder is not materially disadvantaged.
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To this end, Undiluted ICSG which is validly offered on reasonable production cost
contribution terms by the ML holder under a first right of refusal will constitute an offer to
supply replacement gas (see section 3.6.4), provided such gas is of no worse quality
than the CSG which has been affected by the truncated Notice Period. Similarly, if the
CSG tenure holder does not accept the Undiluted ICSG offered, then any compensation
liability of the ML holder will be reduced by the amount of Undiluted ICSG offered except
to the extent that it is not practicable for the CSG tenure holder, acting reasonably, to
provide ICSG off-take infrastructure capacity aligned with the offered supply.
Where Diluted ICSG is offered at volumes and of a quality which aligns with the CSG
tenure holder's utilisation requirements, the ML holder will be entitled to a calorific value
adjusted compensation offset for the Diluted ICSG that the CSG tenure holder agrees to
take. Diluted ICSG which is not accepted will not alter an ML holder's compensation
liability. The rationale behind this approach is that Diluted ICSG may have some
economic value to the overlapping CSG tenure holder which should be captured within
the matrix of the proposed compensation principles.
3.11.5
Consequences of Not Accepting the First Right of Refusal
In circumstances where an overlapping CSG tenure holder does not accept a first right of
refusal offer, the ML holder will be entitled to the beneficial use of that ICSG for mining
purposes or to dispose of the ICSG commercially. That entitlement includes all Diluted
ICSG produced from the IMA and subsequent RMA extensions, and all Undiluted ICSG
produced prior to potential off-take by the CSG tenure holder under later offers.
The Working Group identified two options in relation to the application of subsequent
offers of ICSG. These are outlined in the text box below.
If the CSG tenure holder has declined its first right of refusal to the initial offered supply
of Undiluted ICSG, the options identified were as follows:
 Unless the ML holder has developed viable plans of its own for alternative use or
commercialisation of the Undiluted ICSG, the ML holder must re-offer Undiluted ICSG
on a annual basis unless and until the ML holder does develop such a plan for its own
use or commercialisation of that ICSG.
 Before the ML holder commits to an alternative use or commercialisation of the
Undiluted ICSG, the ML holder must re-offer the Undiluted ICSG to the CSG tenure
holder, together with details of the costs it has incurred in developing such alternative
use or commercialisation. The CSG tenure holder will then have a period of 3 months
in which to accept the offer, which will include the obligation on the CSG tenure holder
to reimburse the ML holder its costs in developing the alternative use or
commercialisation.
It is also suggested that in order to facilitate the use of ICSG where it has not be
accepted by overlapping CSG tenure holders, the ML holder should be free to transport
the gas across tenement boundaries. This would allow for ICSG which is not accepted to
be utilised for beneficial purposes across a mining complex (e.g. multi-site power
generation).
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3.12 Carbon and Royalty Liability

Carbon and royalty liability attach to ownership of gas to avoid any potential
'double-up'.

Royalty liabilities to be addressed through amendments to State legislation.

Carbon liabilities to be addressed through State-based implied indemnities with
support of Commonwealth Government.
To ensure the equitable operation of the first right of refusal mechanism, it will be
necessary for the party that has final custody of any component of ICSG to indemnify the
other party with regard to carbon and royalty liabilities which attach to that ICSG
component.
In order to achieve this outcome in relation to royalty liabilities, amendments to the P&G
Act will be required to ensure that royalty obligations pass to the CSG tenure holder
when ICSG is accepted. This may be achieved by clarifying the definition of 'petroleum
producer' as it is used in sections 590 and 591 of the P&G Act.
It is intended that responsibility for carbon liabilities in relation to the extraction, capture,
storage and transportation of ICSG will be addressed through the introduction of implied
indemnities into the Queensland overlapping tenure legislation. Notwithstanding this, it is
acknowledged that further consultation may be required between the Queensland and
Commonwealth Governments on the interaction of any such indemnities with the carbon
pricing mechanism under the Clean Energy Act 2011 (Cth).
Given the fact that there is no suggestion of altering the underlying liabilities imposed by
the Commonwealth carbon legislation, the Working Group does not perceive this issue as
being a significant barrier to the introduction of state-based implied indemnities to
account for the particular circumstances of overlapping coal and CSG operations. It will
nevertheless be prudent to engage with the Commonwealth Department of Climate
Change and Energy Efficiency and discuss the structure of such indemnities prior to their
introduction in the new overlapping tenure regime.
If the State Government will not support a legislative carbon indemnity, the overlapping
tenure legislation should require parties to include such an indemnity in their
agreements. Industry also seeks the State Government’s support to consult with the
Commonwealth Government to ensure that that an overlapping CSG tenure holder will
not trigger MRRT liabilities for the ICSG it takes from an ML.
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3.13 Hazard Minimisation

Potential for gas drainage activities to create hazards for the future safe and
efficient mining of coal.

Risk of hazard creation applies equally to gas drainage activities conducted by coal
and CSG parties.

Proposed code of practice to be developed for governing the conduct of gas
drainage to minimise hazards.

The Working Group has agreed on this approach as an alternative to any
requirement for the payment of compensation for sterilisation of coal or CSG.

The provisions of the code is not meant to apply on a blanket basis, but rather
only in circumstances that are reasonable and sensible.
The Working Group acknowledges that gas drainage activities in advance of coal mining
enhances mine safety and reduces fugitive methane emissions, but also has the potential
to create significant hazards that could compromise efficient coal resource recovery.
Adverse affects on mine safety and coal resources can arise from the gas drainage
activities of either coal or CSG tenure holders. Accordingly, there is a need to incentivise
all parties to minimise hazards without unduly compromising the efficiency of gas
drainage operations. Existing well guidelines (which have been developed in the context
of protecting underground aquifers) and tenement conditions on hazard visibility (which
apply only to PLs under sections 552A and 552B of the P&G Act) are insufficient to
incentivise behaviours which minimise the affect on the future safe and efficient mining
of coal in all circumstances.
The Working Group proposes that a code of practice for gas drainage of, or through,
mineable coal seams be developed to minimise the risk of hazard creation ('Code of
Practice'). The Code of Practice will need to reflect the general principles identified by
the Working Group.
The Code of Practice should only apply to:

MLs and MLAs; and

areas that are not covered by MLs or MLAs, but are highly likely to be mined in the
foreseeable future, such as where some, or all, of the following apply:

where bona fide development plans are in place;

where there is a brownfield expansion;

where supported by existing infrastructure or feasible infrastructure
solutions;

where there is certainty of resource; and

where it is likely that it will be extracted by underground means.
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(each of the above, being the 'Code Criteria').
The development of such a Code of Practice would require joint technical input which
draws upon recent experiences and technological advancements, including to identify the
classes of tenure, coal categories and timeframes that the code would apply to.
Although the formulation of such a code is outside the scope of this report, the Working
Group suggests that the Code of Practice may operate in the following manner:

relevant provisions would be set out in mining and petroleum regulations which
are incentivised through legislative provisions;

a review process would be conducted every 5 years to account for new
technological developments;

different requirements would apply depending on whether activities are being
conducted on exploration or production tenements;

compliance with the Code of Practice would be a condition of all tenements;

penalties will apply in relation to instances of non-compliance;

the Code of Practice would bind both coal and CSG parties conducting gas
drainage activities;

any dispute as to the application of the Code of Practice would be referred to an
independent expert for determination; and

overlapping parties should be able to agree variations in the scope of application
of the Code of Practice or in the measures to be adopted under the code, provided
that those variations are acceptable to regulators.
The Working Group acknowledges that the application of penalties for non-compliance
poses a potential duplication of impost on ML holders given their compensation for lost
gas obligations. Accordingly, the Working Group recommends further consideration and
analysis be carried out in relation to a tiering of penalties applicable to coal and CSG
tenure holders to obviate this duplication on ML holders. Any penalty structure would
need to disincentivise CSG tenure holders from failing to comply in areas of likely coal
activity, whilst not creating an unnecessary burden on CSG activities conducted in other
areas. A possible two-tiered solution for penalties may involve:

a first tier or penalties which are equally applicable to both coal and CSG tenure
holders in all circumstances; and

a second tier of higher penalties where non-compliance results in adverse impacts
on an overlapping tenement holder.
The Working Group has not defined the scope of application of the proposed Code of
Practice, or on the guiding principles for the development of its content. That is properly
the role of a technical working group, consisting of Government, coal and CSG industry
experts, which it is proposed be convened to develop the Code of Practice (see section
4.4). The Working Group suggests that the technical working group should consider (in
addition to the Code Criteria:
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
the relevant time horizon for satisfying the test of mineable coal; and

whether the Code of Practice should apply to areas of the ML or MLA in which
mining is unlikely to occur.
In circumstances of an ML/MLA or where the Code Criteria are met, and where the CSG
tenure holder can establish sound technical requirements to do so, the Working Group
believes that the CSG tenure holder should be free to use steel casing.
It is also intended that the proposed Code of Practice should supplement the existing
Code of Practice for Constructing and Abandoning Coal Seam Gas Wells in Queensland.
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3.14 Environmental Approvals and Rehabilitation

Overlapping tenure holder will remain responsible
environmental approvals and rehabilitation obligations.
for
their
respective

Overlapping tenure holders may negotiate linked arrangements for codevelopment operations with a view to minimising duplication of regulatory
processes related to environmental protection and rehabilitation.

Provision should be made to enable DNRM and DEHP to take full account of
negotiated linked arrangements lodged with them by overlapping tenure holders.

Provision should also be made for environmental assessment and rehabilitation
requirements imposed on a project to take account of subsequent planned
disturbance and land use by the overlapping tenure holder.

Access by the CSG tenure holder to a mining area should be facilitated as soon as
this is safe and practicable after the completion of mining activities in that area.
In relation to rehabilitation requirements, the status quo is to be preserved and
rehabilitation requirements are to remain conditions of grant of all coal and petroleum
tenements. In the context of overlapping tenements, this will mean that each party will
be responsible for its own rehabilitation requirements as set during the licensing process.
It is not proposed that these alternative rehabilitation requirements would be considered
for major infrastructure or similar areas with a very high cost of rehabilitation per hectare
(e.g. spoil emplacement areas, or regulated dams such as brine or tailings storages).
As a general principle, the Working Group believes that access by the CSG tenure holder
to a mining area should be facilitated as soon as this is safe and practicable after the
completion of mining activities in that area. Within these parameters, the facilitation of
access need not await the conclusion of mine rehabilitation and/or mining tenement
relinquishment. The Working Group recommends that the ML holder be subject to an
obligation to facilitate access for post-mining CSG drainage by an overlapping PL holder
as soon it is safe and practicable (and vice versa in the event of ML holder access to an
area of prior PL operations). The CSG tenure holder could assume liability for the
rehabilitation requirements of such areas that are delineated, or as otherwise agreed by
the overlapping parties. Conversely, the ML holder may assume liability for the
rehabilitation requirements of CSG areas that are to be mined through.
Nevertheless, in applying the foundation principle of derogation by agreement, parties
would be free to otherwise agree to alternative arrangements, provided such
arrangements met the minimum environmental standards set by the Department of
Environment and Heritage Protection ('DEHP'). This will give parties the flexibility to
more effectively manage and coordinate site rehabilitation as well as enter into cost
sharing arrangements for the conduct of rehabilitation activities.
Some prime examples of situations where this is likely to occur would be where a CSG
tenure holder wishes to resume production after an ML holder has completed coal mining
in a given area, and could make use of existing infrastructure or access roads. It would
also arise where an ML holder is advancing through a former or recently abandoned CSG
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area. Any negotiated alternative rehabilitation arrangements would need to be lodged
with both DNRM and DEHP with an appropriate notation to be included on all publicly
available records to notify third parties of such arrangements. Arrangements that define
the liabilities of the parties for rehabilitation would also identify procedures for the
rectification of any default in relation to those liabilities, subject always to the
endorsement of those procedures by either DNRM or DEHP as appropriate.
Environmental approval processes and requirements for environmental protection should
also take full account of the co-development linkages between projects that overlap. In
particular, where the land use of one succeeds the use of the same land by the other.
Where such circumstances exist or eventuate, the following aspects should be
considered:

prior environmental studies, assessments and reports;

the relevant environmental protection measures undertaken by the other party;

the subsequent land use;

each party's stand alone rehabilitation obligations; and

the proposed timing of each production activity.
While the primary objective of these recommendations is the avoidance of waste and
duplication, they are also intended to streamline and expedite approvals processes for PL
grant to maximise the drainage and recovery of CSG ahead of mining (see section 3.10).
The safety and health issues relating to the CSG operations in any ML area will be
determined by the SSE and the SSM acting reasonably, with the SSE having the final
decision in the absence of agreement. Consistent with the principles outlined in section
3.3 of this report, any such access cannot impact on the safe and efficient mining
activities as determined by the SSE.
Consideration should also be given to imposing timelines on any alternative rehabilitation
arrangements to account for any situations where the succeeding party does not access
the overlapping area as planned.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 70
3.15 Expert Determinations and Dispute Resolution
 Independent expert determination of a variety of issues is a key component of the
proposed legislative framework.
 It will be necessary for any dispute resolution process to be fast, final and fair.
 The qualifications and availability of experts to make independent determinations will
need to be considered carefully.
3.15.1
General
The proposed legislative framework as outlined in this report is dependent on expert
determinations in a number of key areas, including:

to resolve any dispute regarding the size of an IMA (see section 3.3.2);

to resolve any dispute regarding the size of a SOZ or the content of a SOZSMP
(see section 3.3.3);

to resolve any dispute regarding the size of any RMA panel (see section 3.3.4);

to assess and decide the appropriateness of any extension to a Notice Period in
circumstances where the MLA holder disputes 'exceptional circumstances' (see
section 3.4.2);

to determine the quantum of compensation and certification of production profiles
in circumstances where a Notice Period is truncated (see section 3.6.2); and

to resolve any dispute regarding the application of the Code of Practice (see
section 3.13).
3.15.2
Necessary Features of Dispute Resolution Process
The Working Group proposes that the development of dispute resolution processes and
structures for independent expert determination is a matter that should be considered
further by a relevant technical working group.
An important outcome of the dispute resolution process is that disputes should be dealt
with as quickly as possible so that the parties’ rights are not inadvertently frustrated by
delay in achieving resolutions.
In order for any dispute resolution process to be effective, it would need to have the
following features:

Fast – the dispute resolution process should be fast to enable a quick resolution of
disputes so that parties can get on with business without the distraction of a longrunning process, and should also be conducted in a way that minimises the impact
on the conduct of activities that are not in dispute;
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 71

Final – for the same reasons, parties need to have some certainty that the
outcome of the process will be settled finally, without risk of an extensive appeal
process, and all the uncertainty and disruption that provides;

Fair – for the process to work (particularly if the decision is final), both parties
need to have confidence that the outcomes will be fair and reasonable. The more
predictable the process is (e.g. through established principles, methodologies or
formulae which the decision-makers must follow), the more likely that will be the
case. Fairness will also require that:

the parties have confidence in the decision-maker (both in terms of
expertise and in terms of independence);

the parties have equal access to information; and

the parties have sufficient time to prepare their submissions.
3.15.3
Qualifications and Availability of Experts
Qualifications and status of independent experts will need to be considered carefully. It is
anticipated that the majority of such experts will come from a petroleum background and
this may cause some concern for the coal industry. It is possible that this concern may
be alleviated if, for example, the QRC or APPEA were to appoint the expert. Another
possible approach would be to have a panel of three experts, one nominated by each
party, and the third by the QRC, although that has potential to add to cost and
complexity of the process.
Another issue will be the simple availability of suitably qualified independent experts,
given the current demand for their skills. If an expert dispute-resolution mechanism is
adopted, QRC should (in conjunction with members) develop a register of 'endorsed'
experts who would be available for providing this kind of service.
Some Coal parties may not have relevant in-house expertise to assess the CSG party’s
position, or to prepare submissions in response. Again, if QRC were to develop a panel of
available experts, there may be some merit in them also maintaining a register of
consultants who are able to provide expertise to coal parties.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 72
4.
Legislative Implementation
4.1
Transitional Arrangements

New principles will apply to all existing exploration tenure and future production
tenure.

Existing production tenements, and future applications overlapping the area of
existing production tenements, would remain subject to the current regime
requirements unless parties elect to 'opt-in' to the new framework by negotiated
agreement.

Existing production tenements granted under the Petroleum Act that are converted
to production tenements under the P&G Act would also remain subject to the
current regime requirements unless parties elect to 'opt-in' to the new framework
by negotiated agreement.

Co-development agreements in place before commencement will remain in force
unless otherwise agreed by the parties.

Further consideration is required in relation to the applicability of the new
framework to existing production tenement applications.
It is intended that in drafting legislative amendments to give effect to the new framework
proposed in this report, transitional arrangements will be included to deal with the
manner in which previously granted tenures are affected by the changes.
Upon commencement of the legislative amendments, the new principles will not apply to
existing production tenements (which will remain the subject of the existing legislative
regime) but would apply to all existing and future exploration tenure and future
production tenure. For the sake of clarity, it should be noted that 'existing production
tenements' in this context will include production tenements granted under the Petroleum
Act that may subsequently be converted to production tenements under the P&G Act.
Example
Gas Co. has a PL which was granted in 2010 and is overlapped by Mine Co.'s EPC which
was granted in 2009. Following commencement of the legislative amendments, Mine Co.
seeks to apply for an ML over Gas Co.'s PL. As the PL was granted prior to the legislative
amendments, Mine Co. will not have a 'right of way' and Gas Co. will retain a right of
veto to the grant of the ML. Both parties would require a coordination arrangement
before Mine Co.'s ML could be granted.
This will also entail the preservation of existing co-development agreements and
coordination arrangements which were finalised prior to the commencement date to
ensure that the legislative reforms do not retrospectively effect agreements that have
already been soundly struck.
Parties holding existing production tenements will nevertheless be able to 'opt-in' to the
new framework by negotiating alternative arrangements with other overlapping tenure
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 73
holders, and preserved co-development agreements and coordination arrangements may
be amended to account for the new principles if the parties so agree.
While the Working Group has reached consensus on the package of elements within the
proposed framework, it has been unable to reach consensus on the application of the
new principles to existing production tenement applications and retention tenements (i.e.
mineral development licences ('MDLs') and potential commercial areas ('PCAs')). In
brief, the positions of each industry membership within the Working Group are as set out
in the text boxes below.
Coal
The Coal Working Group members, based upon broader coal industry consultation, are of
the view that the new regime should apply from 31 December 2012 to all future
production tenure, including those presently the subject of production tenure applications
and those presently the subject of retention tenure, so as to have the broadest
application whilst maintaining the integrity of pre-existing commitments and abilities to
contract under current production tenure rights and conditions. A key consequence of the
proposed approach to transitional arrangements is that there will never be the need for
Ministerial Preference Decisions (currently pending Ministerial Preference Decisions would
effectively be resolved by the new legislative regime), and there would be no
requirement to retain dual legislative regimes for production tenement applications after
the commencement of the new legislation.
CSG
The CSG Working Group members, similarly based upon broader CSG industry
consultation, are of the view that production tenure applications in a defined geographical
area (see area marked in red on the map in Schedule 5) ('Grandfathered Production
Tenure Applications') should remain under the existing regime for a defined transition
period of 4 years commencing on 31 December 2012, on the basis that:

if the production tenure is granted within this transition period, the granted
production tenure (PL or ML) will remain within the existing regime (unless both
parties elect to be governed by the new regime); and

if no production tenure has been granted in respect of the Grandfathered
Production Tenure Application by the end of the transition period, the tenure will
cease to be a Grandfathered Production Tenure Application and it will be subject to
the new regime going forward.
All other production tenure applications (PLAs, MLAs), and all retention tenures (i.e. PCAs
and MDLs) will be governed by the new regime when it comes into operation.
If adopted in the form proposed by the CSG Working Group members, the transitional
arrangements would operate so that all overlapping mining and petroleum tenures would
be covered by the new regime, except:
 PLs and MLs that are granted at the time of the legislation implementing the new
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 74
regime comes into force;
 tenures that are the subject of a co-development agreement that is executed at the
time the legislation implementing the new regime comes into force;
 Grandfathered Production Tenure Applications (for the duration of the Transition
Period); and
 PLs and MLs that are granted from the Grandfathered Production Tenure Applications
on or before 31 December 2016.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 75
4.2
Harmonisation
In order to operationalise the proposed framework there is a need for further legislative
amendments to harmonise differing requirements across a variety of laws and
regulations. This will necessitate not only changes to the MRA, P&G Act and Petroleum
Act, but also to the Environmental Protection Act 1994 (Qld) and Coal Mining Safety and
Health Act 1999 (Qld) (among others). These changes are discussed in the body of this
report. However, it should be noted that harmonisation amendments would be required
in relation to the following issues:

environmental issues (see section 3.14);

safety and health issues (see section 3.3.3);

land access (see section 3.3.8);

mining and petroleum data availability (including public access) (see section
3.2.3);

ability to vary work program and relinquishment requirements for ATP holders to
the extent of any coal 'right of way' (see section 3.2.2);

ability for ATP holders to take and commercialise ICSG (see section 3.11.1);

ML holders' ability to commercialise ICSG where a first right of refusal offer is not
accepted by an overlapping petroleum tenure holder (see section 3.11.5);

carbon and royalty liabilities (see section 3.12); and

other issues that were the subject of the now lapsed Resources Legislation
(Balance, Certainty and Efficiency) Bill 2011.
Given the complexity of any overlapping tenure regime, the Working Group suggests that
DNRM consider the utility of implementing the legislation by way of stand-alone
overlapping tenure legislation, rather than continuing to duplicate the regime across the
MRA, P&G Act and Petroleum Act.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 76
4.3
Treatment of Concurrent Production Applications
The Working Group acknowledges that while the proposed legislative framework seeks a
reasonable balance between competing coal and CSG interests in the context where one
project is leading and the other is trailing, the principles relating to compensation and
Notice Periods will prove problematic in situations where there are similar project
timelines (i.e. MLAs and PLAs are made at a similar time). It is not the intention of the
Working Group to create binary outcomes in this situation. However, to ensure the
fairness of the proposed framework a middle-ground must be sought.
Such a mechanism would have to alleviate the effects of the vicissitudes of DNRM
processing timelines, which could potentially mean that the application which is
processed quicker gives rise to superior rights. Possible suggestions include:

more extensive information exchange requirements;

nomination periods at lodgement, such that lodgement of one production tenure
would require the converse overlapping exploration tenure holder to indicate
whether they intend on lodging a production tenure application in the near future;
or

some modification of notice and compensation principles with parameters around
specific circumstances.
The following principles should apply in developing any such mechanism for addressing
concurrent production tenure applications:

Any process (whether it involves modified rules or not) should encourage or
require parties to share plans for production projects and tenement applications at
an early stage and seek to negotiate (from an early stage) bespoke commercial
agreements to manage the outcomes and impacts of concurrent production plans.

The Working Group would want to ensure that any modified application of the
notice or compensation principles results in a fair outcome for both parties, and
intends that such modifications should only apply in a minority of cases.

Further work is required to develop an appropriate definition of what would
constitute a 'concurrent' application. Preferably, this would be within well-defined
time-limits to ensure that:

parties have certainty from an early point in the process as to what rules
will apply to them; and

opportunities for inappropriately lodging concurrent applications are limited,
yet providing sufficient time so that legitimate proposed applications which
are already on foot have time to be finalised and lodged.
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| page 77
4.4
Technical Working Groups
In developing the proposed legislative framework which is outlined in this report, the
Working Group was not mandated to provide specific technical details relating to the
management of overlapping tenure in Queensland. Rather, it was always recognised that
further government-led technical consultation would be required to implement the broad
principles which are proposed by the Working Group.
To this end, there are a number of areas that were outside the scope of the Working
Group's expertise, including:

the parameters around how the minimum area of an IMA is to be determined (see
section 3.3.2);

the division of safety and health responsibilities in relation to operations conducted
within the SOZ and in an underground IMA (see sections 3.3.3 and 3.3.7);

principles relating to land access (see section 3.3.8).

appropriate criteria regarding the definition and eligibility of exception wells or
fields which will justify an extension of Notice Periods (see section 3.4.2);

formulating methodologies for the calculation of compensation and assessment of
production profiles (see section 3.6.2);

formulating methodologies for the reconciliation of compensation payments in
circumstances of subsequent recovery of lost CSG production (see section 3.6.7);

defining the list of infrastructure which constitutes Major and Minor Gas
Infrastructure (see sections 3.7.1 and 3.8);

the treatment of stranded assets that result from the exercise of the 'right of way'
and whether any compensation methodologies should be developed (see section
3.7.3);

the development of the Code of Practice (see section 3.13); and

the development of dispute resolution processes and structures for independent
expert determination (see section 3.15.1).
The Working Group recommends that the Queensland Government establishes technical
working groups to finalise any issues relating to each of the above areas. It is suggested
that an independent chair also be appointed for each technical working group to facilitate
the needs of both coal and CSG representatives.
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| page 78
Schedule 1 – QRC and APPEA Overlapping Tenure Consultation
Sent
to/Attendance
Date
Organisation
Content
1/09/2011
QRC
Via email: Invitation to Coal and CSG CEOs to first joint meeting – present coal position to CSG.
QRC Coal and
CSG CEOs
5/09/2011
QRC
Via email: See above – change date of the first joint CEO meeting
QRC Coal and
CSG CEOs
09/09/2011
QRC
Meeting: QRC Coal and CSG CEOs met. Coal CEOs presented a proposal to CSG.
QRC Coal and
CSG CEOs
Company’s represented:

APPEA

Origin (APLNG)

Vale

Arrow Energy

Peabody Energy

Westside

BHP/BMA

QCoal

Xstrata

Caledon

QGC (BG Group)

Yancoal

Jellinbah

Rio Tinto Coal

Macarthur

Santos (GLNG)
Apologies:

Anglo American

Eagle Downs

Noble Energy

Aquilia Resources

Ensham (now Idemitsu)

Sonomacoal

Bow Energy

New Hope Coal
13/09/2011
QRC
Via email: coal industry position paper sent to CSG CEOs
QRC CSG CEOs
21/09/2011
QRC
Via email: Invitation to coal and CSG CEOs. CSG industry response to the coal industry proposal
28/09/2011
QRC
Meeting: QRC Coal and CSG CEOs meeting. CSG CEOs responded to the coal industry proposal.
Company’s represented:

APPEA

Macarthur

QRC Coal and
CSG CEOs
QRC Coal and
CSG CEOs
Sonomacoal
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 79
Date
Organisation
Sent
to/Attendance
Content

Arrow Energy

Origin (APLNG)

Vale

Bandanna Energy

Peabody Energy

Westside

BHP/BMA

QGC (BG Group)

Xstrata

Caledon

Rio Tinto Coal

Jellinbah

Santos (GLNG)
Apologies:
29/09/2011
Minter Ellison

Anglo American

Eagle Downs

Noble Energy

Aquilia Resources

Ensham (now Idemitsu)

Q Coal

Bow Energy

New Hope Coal
Via email: update to all QRC Coal and CSG CEOs of the outcomes of joint CEO meeting on 28/09/2011 –
establishment and nominated membership by each industry of a joint industry working group.
QRC Coal and
CSG CEOs
QRC September 2011 Bulletin issue to members.
"Industry still has a short window of opportunity to develop a mutually agreeable framework with government on
overlapping coal and coal seam gas (CSG) tenure.
End
September
2011
Government wants to have a solution settled (if not legislated) by the end of 2011.
QRC
The combined coal and CSG CEO-level meeting held on 28 September to discuss some reform principles was
extremely positive, with both sectors working with a spirit of compromise. As a result, a small coal/CSG joint working
group has been established to work through key elements of the proposal that require further discussion. The
working group is meeting regularly, again bringing to bear a constructive, solutions-based approach.
All QRC
members
It is hoped that a workable framework can be presented to the wider coal and CSG sectors early next month for their
input."
14/10/2011
QRC
10/11/2011
APPEA
18/11/2011
QRC
Brief to QRC Board Directors – 14 October QRC Board Meeting
Via email: Powerpoint presentation sent to all APPEA members outlining the proposed framework to date.
Meeting: Update to the QRC Health and Safety Committee on a future reform proposal for overlapping tenure –
recommendation to liaise with Government directly once a final joint industry agreed position reached.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
All QRC Board
members
All APPEA
members
QRC Health and
Safety
| page 80
Date
Organisation
Sent
to/Attendance
Content
Committee
members
09/12/2011
QRC
All QRC Board
members
Brief to QRC Board Directors – 9 December QRC Board Meeting
QRC November/December 2011 Bulletin issue to members.
"The overlapping tenure work is progressing well with the final joint coal and coal-seam gas working group meeting
to be held in mid-December.
16/12/2011
QRC
The joint working group has committed more than 50 hours to working through some of the detail in a possible
overlapping tenure framework. QRC expects consultation with the wider coal and coal-seam gas industries to begin
in the first quarter of 2012.
All QRC
members
QRC thanks the working group for its hard work and spirit of compromise throughout the first step of the journey."
Meeting: APPEA Small/Midcap meeting with representatives of the companies at this meeting – overlapping tenures
was discussed.
APPEA
members
20/12/2011
APPEA
22/12/2011
QRC/APPEA
Via email: Invitation to Coal and CSG CEO meeting – presentation of the joint working group proposal.
20/01/2012
QRC/APPEA
Via email: Invitation to APPEA CSG CEOs (non-QRC members) to the joint Coal and CSG CEO meeting on 31 January
2012.
APPEA CEOs
30/01/2012
QRC/APPEA
Via email: update to all Coal and CSG CEOs on planned industry workshops and issue of briefing paper for the 31
January 2012 CEO meeting.
QRC/APPEA
CEOs
31/01/2012
QRC/APPEA
Meeting: Coal and CSG CEOs meeting. The working group presented a joint industry proposal to wider industry.
Company’s represented:

Acer Energy

Exoma

QGC (BG Group)

Aquila Resources

Galilee Energy

Santos (GLNG)

Arrow Energy

Jellinbah

Stanwell

Bandanna Energy

Macarthur

Vale
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
QRC/APPEA
Coal and CSG
CEOs
QRC/APPEA coal
and CSG CEOs
| page 81
Date
Organisation
Sent
to/Attendance
Content

BHP BMA

Metallica Minerals

Westside

Blue Energy

Metro Coal

Xstrata

Caledon

New Hope Coal

Yancoal

Comet Ridge

Origin (APLNG)

Dart Energy

Peabody Energy

Eagle Downs

QCoal
Apologies:

Acer Energy

Ensham (now Idemitsu)

Rio Tinto Coal

AGL

Icon energy

Sonomaccoal

Anglo American

Noble energy
1/02/2012
QRC/APPEA
Via email: Update on release of the joint industry detailed discussion paper on the proposed framework.
QRC/APPEA
CEOs
3/02/2012
QRC/APPEA
Via email: Confirmation of Coal and CSG industry workshop dates.
QRC/APPEA
CEOs
3/02/2012
APPEA
6/02/2012
QRC/APPEA
Meeting: APPEA Explorers Leadership Group was established with Simon Mewing nominated as the lead regarding
Overlapping Tenures.
Via email: Release of the joint industry detailed discussion paper on the proposed framework.
APPEA
members
QRC/APPEA
CEOs
QRC January 2012 Bulletin issue to members.
" A series of specific industry workshops on overlapping tenures have been planned for coal and coal-seam gas
members to work through new framework.
7/02/2012
QRC
A CEO briefing in January was a prelude to the workshops, which will begin on 13 February.
All QRC
members
QRC has released a detailed paper to coal and coal-seam gas members on the new proposed framework for
feedback.
Email Katie-Anne Mulder - for a copy of the paper or to express interest in involvement coal-seam gas or coal
workshops".
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 82
Date
Organisation
10/02/2012
QRC
13/02/2012
QRC/APPEA
Meeting: First Coal industry workshop
QRC coal
members
Company’s represented:

Allegiance Coal

Jellinbah

QCoal

BHP BMA

Jindal Steel and Power

Rio Tinto Coal

Caledon

Macarthur

Vale

Ensham (now Idemitsu)

MetroCoal

Xstrata

Intergas

Peabody Energy
Meeting: First CSG industry workshop
QRC/APPEA
CSG members
Company’s represented:

AGL

Origin (APLNG)

Stanwell

Arrow Energy

QGC (BG Group)

Westside

Blue Energy

RLMS

Comet Ridge

Santos (GLNG)
16/02/2012
QRC
Via email: Initial feedback table sent to Coal industry
17/02/2012
QRC
Brief to QRC Board Directors – 17 February QRC Board Meeting
17/02/2012
QRC
17/02/2012
QRC/APPEA
Sent
to/Attendance
Content
QRC coal
members
All QRC Board
members
Meeting: Second Coal industry workshop
QRC coal
members
Company’s represented:

BHP BMA

MetroCoal

Rio Tinto Coal

Caledon

Peabody Energy

Vale

Jellinbah

QCoal

Xstrata

Macarthur
Via email: Initial feedback table sent to CSG industry
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
QRC/APPEA
| page 83
Date
Organisation
Sent
to/Attendance
Content
members
20/02/2012
QRC/APPEA
Meeting: Second CSG industry workshop
QRC/APPEA
CSG members
Company’s represented:

AGL

Origin (APLNG)

Stanwell

Arrow Energy

QGC (BG Group)

Westside

Blue Energy

RLMS

Comet Ridge

Santos (GLNG)
QRC February 2012 Bulletin issue to members.
"Valuable feedback was received from the coal and coal-seam gas industries during QRC’s overlapping tenures
framework workshops held in February.
01/03/2012
QRC
QRC members
More workshops will be held in early March.
If you are unable to attend to your industry’s workshop (either coal or coal-seam gas), or wish to discuss the overall
framework or any concerns, contact Katie-Anne Mulder."
12/03/2012
APPEA
15/03/2012
QRC/APPEA
QRC/APPEA
CSG members
Via email: Invitation to attend third CSG industry workshop.
Meeting: Third CSG industry workshop
QRC/APPEA
CSG members
Company’s represented:

AGL

Origin (APLNG)

Stanwell

Arrow Energy

QGC (BG Group)

Westside

Blue Energy

RLMS

Comet Ridge

Santos (GLNG)
16/03/2012
QRC
Email: Update to coal wider industry on developments to date on wider industry feedback, including the working
group’s progress.
QRC coal
members
20/03/2012
QRC
Email: Distributed responses to coal feedback provided at the industry workshops. Also acknowledged some areas of
the framework are still being negotiated – for example a small explorer position.
QRC coal
members
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 84
Date
Organisation
23/03/2012
QRC/APPEA
26/03/2012
APPEA
27/03/2012
30/03/2012
APPEA
APPEA
Sent
to/Attendance
Content
QRC/APPEA
members
Meeting: Joint Coal and CSG working group meeting
Meeting: CSG small mid-cap explorer meeting
QRC/APPEA
CSG members
Company’s represented:

AGL

Galilee Energy

Santos (GLNG)

Arrow Energy

Origin (APLNG)

Stanwell

Blue Energy

QGC (BG Group)

Westside

Comet Ridge

RLMS
Meeting: CSG small mid-cap explorer meeting
QRC/APPEA
CSG members
Company’s represented:

Arrow Energy

Comet Ridge

Origin (APLNG)

Blue Energy

Galilee Energy

Westside
Meeting: CSG small mid-cap explorer meeting
QRC/APPEA
CSG members
Company’s represented:

Arrow Energy

Comet Ridge

Galilee Energy

Blue Energy

Exoma

Westside
QRC March 2012 Bulletin issue to members:
01/04/2012
QRC
"Thank you to all members who attended the overlapping tenures industry workshops held in February. QRC has
received valuable feedback from both coal and coal-seam gas members on the proposed draft overlapping tenure
framework.
QRC members
There is still opportunity to comment on the draft framework with a new extended delivery time to government—end
of April 2012."
04/04/2012
QRC/APPEA
Meeting: Joint Coal and CSG working group meeting – presentation of the CSG small mid-cap explorer proposal
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
QRC/APPEA
members
| page 85
Date
Organisation
12/04/2012
QRC/APPEA
13/04/2012
CSG small
mid-cap
explorer
17/04/2012
QRC/APPEA
20/04/2012
QRC
Content
Sent
to/Attendance
Meeting: Joint Coal and CSG working group meeting
QRC/APPEA
members
Meeting: CSG small mid-cap explorer meeting
QRC/APPEA
members
Meeting: Joint Coal and CSG working group meeting
QRC/APPEA
members
Brief to QRC Board Directors – 20 April QRC Board Meeting
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
QRC members
| page 86
Schedule 2 – Specific Information Exchange Obligations
Timing of Exchange
Information to be Exchanged

Copies of tenement applications
Mine Plans showing IMA and FMA (future operations datestamped)
Gas field development plans showing existing/intended wells
Simultaneous Operations Zone Safety Management Plan
Joint infrastructure plans
General information relating to development and production
CSG
production
data,
certified
production
profiles
calculated production profiles (delayed production PLs)
and

3.2.3

3.3.6

Upon lodgement of MLA

3.3.2

Updates provided at least annually

3.3.6

3.4.1

Upon lodgement of the PLA

3.3.6

Updates provided at least annually

3.4.1

As required where concurrent activities in the SOZ
are contemplated.

3.2.3
Updates provided at least annually

3.3.3


As required where concurrent activities in the SOZ
are contemplated.

3.3.6

Updates provided at least annually

Provided at least annually where overlapping
tenure exists (especially important in the context
of overlapping exploration tenure).

3.3.6

Within 90 days of the ML application.

3.4.2

Prior to abandonment following the receipt of an
Acceleration Notice.

3.6.2

3.6.3
goals
Information proving status of high-performing wells
Upon lodgement
Section Reference
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 87
Schedule 3 – Overlapping Tenure Scenarios
Scenario
PL/ML
Access for
Mining
Activities to
Area of Overlap
Access for CSG
Activities to
Area of Overlap




Sole
occupancy of
the whole
(open-cut) or
part
(underground
) of the IMA
(being a
subset of the
area of
overlap)
following
expiration of
10 year
Notice Period,
unless
otherwise
truncated
(see sections
3.3.2 and
3.3.7).

Ability to
expand
operations
into RMA as
mining
operations
advance out
of IMA (see
section
3.3.4).
Ability to
conduct
activities
outside of the
IMA, RMA and
SOZ subject

Right to
produce
within area
of IMA up
until expiry
of 10 year
Notice Period
and
formation of
IMA, at
which time
the PL holder
must
abandon the
area (see
section
3.3.2).
In
underground
scenarios,
reasonable
access to
IMA
permitted at
PL holder's
sole risk
where such
activities do
not affect
safe and
efficient
mining (see
section
3.3.7).
Ability to
conduct
operations
Safety




Information
Exchange
ML holder's
SSE
responsible
for safety
within IMA,
active RMA
and SOZ
(see
section
3.3).
PL holder
activities
within SOZ
subject to
safety
requiremen
ts of SSE
and
SOZSMP
(see
section
3.3.3).
PL holder
activities
within an
undergroun
d IMA
subject to
safety
requiremen
ts of ML
holder's
SSE (see
section
3.3.7).
Ongoing

ML holder
and PL
holder
under
obligation
to meet
regularly
(and at
least
annually) to
exchange
information
and discuss
developmen
t plans (see
sections
3.2.3 and
3.3.6).
Abandonment
Notice



ML holder must
give 10 years
notice from 12
months after
the date of MLA
lodgement
before
commencement
of IMA (see
section 3.4.1).
10 year Notice
Period may be
truncated by
issuing of an
Acceleration
Notice which
states the date
that mining
operations are
to commence
(see section
3.4.3).
Confirmation
Notice to be
issued by ML
holder 18
months before
mining
operations
commence and
before each
panel of area is
added as part
of the RMA (see
sections 3.3.2
and 3.3.4).
Compensation



No
compensation
outside of 10
year Notice
Periods, except
for affected
Major Gas
Infrastructure
and certain
Major ATP
Infrastructure
(see sections
3.5.2 and
3.9.1).
Where 10 year
Notice Period is
truncated, ML
holder to
compensate PL
holder for lost
CSG production
and impacts to
Major and Minor
Gas
Infrastructure
(see sections
3.6.1, 3.7 and
3.8).
Compensation
assessed at time
of abandonment
(see section
3.6.2).
ICSG Rights

PL holder
to be
given a
first right
of refusal
to any
ICSG
produced
from the
area of
the ML
holder's
sole
occupanc
y (see
section
3.11.1).

Carbon
and
royalty
liability
will
attach to
ownershi
p of the
ICSG
(see
section
3.12).

Where
the first
right of
refusal
offer to
ICSG is
not
accepted
Rehabilitation
Liability

Each party
will be
responsible
for their own
rehabilitation
requirements
(see section
3.14).

Parties may
negotiate
linked
arrangement
s which will
need to be
lodged with
DNRM and
DEHP (see
section
3.14).
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 88
Scenario
Access for
Mining
Activities to
Area of Overlap
Access for CSG
Activities to
Area of Overlap
to safety
directions of
PL holder's
SSM (see
section
3.3.5).
within the
SOZ subject
to safety
requirements
of SSE and
SOZSMP
(see section
3.3.3).

ATP1/ML
1

Sole
occupancy of
the whole
(open-cut) or
part
(underground
) of the IMA
(being a
subset of the
area of
Safety

Right to
conduct
operations
outside of
the IMA,
active RMA,
and SOZ are
unfettered
(see section
3.3.1).
Ability to
conduct
exploration
activities
outside of
the ML
holder's
areas of sole
occupancy
provided
Information
Exchange
Abandonment
Notice
Compensation
ICSG Rights
exploration
or access
by ML
holder
outside of
IMA, active
RMA, SOZ
subject to
safety
directions
of PL
holder's
SSM (see
section
3.3.5).

Both PL
and ML
holders will
be subject
to the gas
drainage
hazard
minimisatio
n Code of
Practice
(see
section
3.13).

ML holder's
SSE
responsible
for safety
within IMA,
active RMA
and SOZ
(see
section
Rehabilitation
Liability
by the PL
holder,
the ML
holder
will be
free to
beneficial
ly use the
ICSG
(see
section
3.11.5).

ML holder
and ATP
holder
under
obligation
to meet
regularly
(and at
least
annually) to

Confirmation
Notice to be
issued by ML
holder 18
months before
mining
operations
commence and
before each
panel of area is

No
compensation
for lost CSG
production (see
section 3.5.2).

Compensation
for depreciated
value of major

ATP
holder to
be given
a first
right of
refusal to
any ICSG
produced
from the
area of

Each party
will be
responsible
for their own
rehabilitation
requirements
(see section
3.14).
Note that this scenario will apply equally to PCAs.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 89
Scenario
Access for
Mining
Activities to
Area of Overlap
overlap) (see
section
3.3.2).

Ability to
expand
operations
into RMA as
mining
operations
advance out
of IMA (see
section
3.3.4).
Access for CSG
Activities to
Area of Overlap
such
activities do
not
adversely
affect safe
and efficient
mining and
are subject
to safety
directions of
the ML
holder's SSE
(see section
3.3.5).
Safety
Information
Exchange
3.3).


ATP holder
must
comply
with safety
directions
of ML
holder's
SSE in
relation to
activities
conducted
within the
area of
overlap
(see
section
3.3.5).
Both ATP
and ML
holders will
be subject
to the gas
drainage
hazard
minimisatio
n Code of
Practice
(see
section
3.13).
exchange
information
and discuss
developmen
t plans (see
sections
3.2.3 and
3.3.6).
Abandonment
Notice
added as part
of the RMA (see
sections 3.3.2
and 3.3.4).
Compensation
ICSG Rights
ATP
infrastructure
which is covered
by the IMA (see
section 3.9.1).
the ML
holder's
sole
occupanc
y (see
section
3.11.1).

Carbon
and
royalty
liability
will
attach to
ownershi
p of the
ICSG
(see
section
3.12).

Where
the first
right of
refusal
offer to
ICSG is
not
accepted
by the
ATP
holder,
the ML
holder
will be
free to
beneficial
ly use the
ICSG
(see
section
3.11.5).
Rehabilitation
Liability

Parties may
negotiate
linked
arrangement
s which will
need to be
lodged with
DNRM and
DEHP (see
section
3.14).
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 90
Scenario
PL/EPC2
2
Access for
Mining
Activities to
Area of Overlap
Access for CSG
Activities to
Area of Overlap


Ability to
conduct
exploration
and access
area of
overlap
provided such
activities do
not adversely
affect safe
and efficient
gas extraction
and are
subject to
safety
directions of
the PL
holder's SSM
(see section
3.3.5).
PL holder
unfettered in
conducting
CSG related
activities
(see section
3.3.1).
Safety
Information
Exchange

PL holder's
SSM
responsible
for safety
in area of
PL (see
section
3.3.5).

EPC holder
must
comply
with safety
directions
of PL
holder's
SSM in
relation to
activities
conducted
within the
area of
overlap
(see
section
3.3.5).

Both EPC
and PL
holders will
be subject
to the gas
drainage
hazard
minimisatio
n Code of
Practice
(see
section

PL holder
and EPC
holder
under
obligation
to meet
regularly
(and at
least
annually) to
exchange
information
and discuss
developmen
t plans (see
sections
3.2.3 and
3.3.6).
Abandonment
Notice

10 year Notice
Period will run
from 12
months after
the date that
the EPC holder
lodges an MLA
(see section
3.4.1)
Compensation

N/A
ICSG Rights

N/A
Rehabilitation
Liability

Each party
will be
responsible
for their own
rehabilitation
requirements
(see section
3.14).

Parties may
negotiate
linked
arrangement
s which will
need to be
lodged with
DNRM and
DEHP (see
section
3.14).
Note that this scenario will apply equally to MDLs.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 91
Scenario
Access for
Mining
Activities to
Area of Overlap
Access for CSG
Activities to
Area of Overlap
Safety
Information
Exchange
Abandonment
Notice
Compensation
ICSG Rights
Rehabilitation
Liability
3.13).
ATP/EPC

Ability to
conduct
exploration
and access
area of
overlap
provided such
activities do
not adversely
affect
authorised
activities
which have
already
commenced
on the
overlapping
ATP (see
section
3.3.5).

Ability to
conduct
exploration
and access
area of
overlap
provided
such
activities do
not
adversely
affect
authorised
activities
which have
already
commenced
on the
overlapping
EPC (see
section
3.3.5).


Both ATP
and EPC
holders
under
obligation
to act
safely and
not
impinge
other’s
existing
safe and
efficient
operations.
Both ATP
and EPC
holders will
be subject
to the gas
drainage
hazard
minimisatio
n Code of
Practice
(see
section
3.13).

ATP holder
and EPC
holder
under
obligation
to meet
regularly
(and at
least
annually) to
exchange
information
and discuss
developmen
t plans (see
section
3.2.3).

Where the EPC
holder
advances to
production, the
IMA would only
come into
effect 18
months after
the issuing of a
Confirmation
Notice (see
sections 3.3.2
and 3.4.1).

N/A

N/A

Each party
will be
responsible
for their own
rehabilitation
requirements
(see section
3.14).

Parties may
negotiate
linked
arrangement
s which will
need to be
lodged with
DNRM and
DEHP (see
section
3.14).
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 92
Schedule 4 – Worked Example
1.1
Existing Petroleum Lease
Gas Co has a pre-existing PL over a large area which was granted on 1 January 2013.
The new principles apply to the area as the PL was granted after the new regime
commenced. Gas Co has started production on the PL and has existing on site
infrastructure including:

production wells;

water and gas gathering pipelines;

trunklines;

storage ponds and pump stations;

field compression stations;

central processing plant (this may not exist on every PL);

gas collection header (where it crosses the PL);

export pipeline (where it crosses the PL); and

accommodation camps.
Mine Co has an EPC over part of the area of Gas Co's PL. This EPC was granted in 2011.
Mine Co lodges an ML application over the EPC area on 1 February 2013. Mine Co
requires an environmental impact statement ('EIS') to support its MLA and
environmental authority ('EA'), and needs access to the PL area to collect its data to
support the EIS (e.g. flora and fauna surveys and to complete the cultural heritage
clearance).
Question
Proposed New
Principles
Current Regime
Draft Bill
Can exploration
continue after the
grant of the PL?
Only with PL
holder’s consent – if
veto – must explain
reasons to DNRM.
Only with PL
holder’s consent – if
veto – must explain
reasons to DNRM.
Yes but subject to
safety directions
from SSM, and
should not impede
safe and efficient
gas operations.
Is Gas Co consent to
MLA required?
Yes – has veto
rights.
Yes – has veto
rights.
No – ML can be
granted as of right.
Is there a need to
negotiate a co development
agreement for grant
In practice yes, as a
condition of gas
party consent (as
Gas Co has veto
In practice yes, as a
condition of gas
party consent (as
Gas Co has veto
No – statutory base
line for co
development
activities.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 93
Question
Current Regime
Draft Bill
Proposed New
Principles
of the ML?
right).
right).
Parties free to
negotiate their own
agreement. Not
required for grant of
ML.
Can the ML applicant
enter the area of the
PL to carry out EIS
studies/Cultural
Heritage clearance?
Only with PL
holder’s consent.
Only with PL
holder’s consent .
Yes - but subject to
safety directions
from the SSM.
Does Mine Co have
to pay compensation
to Gas Co?
No statutory
requirement but
Mine Co unlikely to
obtain consent to ML
grant without
agreeing to this.
No statutory
requirement but
Mine Co unlikely to
obtain consent to ML
grant without
agreeing to this.
No – compensation
would only arise
where truncated
Notice Period
(default = 10
years), and only to
extent of IMA
impacts (not whole
of ML).
Do Gas Co and Mine
Co exchange
information with
each other?
Statutory
requirement for
production tenure
applicant to provide
a copy of its
development plan to
the overlapping
party.
Statutory
requirement for
production tenure
applicant to provide
a copy of its
development plan to
the overlapping
party.
Yes –parties to meet
regularly to
exchange activities
and development
plans.
No ongoing
exchange of
information
required.
No ongoing
exchange of
information
required.
Timing dependent
upon progress of
negotiations with
Gas Co (Gas Co
consent required).
Timing dependent
upon progress of
negotiations with
Gas Co (Gas Co
consent required).
Timing for grant of
ML?
No delay due to
overlapping
tenement issues.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 94
1.2
Mining Lease is Granted
An ML is granted to Mine Co on 1 February 2015. Mine Co will develop an underground
mine with some open cut pits. Mine Co will also be constructing the following
infrastructure on its ML area:

offices;

sewerage treatment plant;

access and haul roads;

coal preparation plant;

accommodation camp;

conveyors;

rail load out;

water storage;

tailings dams; and

any gas drainage wells and associated infrastructure to facilitate pre-drainage.
Prior to the grant of the ML, Mine Co will have consulted with the Gas Co on its Mine Plan
which shows the proposed layout of the mine including:

location of key infrastructure;

IMAs for open cut and underground operations (separate IMAs for each
operation);

the direction of mining from each IMA;

the Mine Co’s best estimate of when development and extraction will commence in
each underground panel ('date stamped' with Reference Dates to show
approximate timings); and

the rate and direction of advancement of the open cut pit/s panel ('date stamped'
with Reference Dates to show approximate timings).
It is expected that the coal infrastructure would be located within the bounds of the IMA
(or in this case multiple IMAs).
Mine Co could not establish an IMA requiring abandonment of Major Gas Infrastructure
until/unless that infrastructure has been relocated to a location acceptable to Gas Co at
Minel Co’s cost and was fully operational. This will make early exchanges of information
and plans on both sides critical.
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 95
Gas Co also shared information with Mine Co on its field development plans and location
of infrastructure, including:

layout of current and proposed wells and other infrastructure within MLA area;

approximate timings for future planned wells and infrastructure; and

gas in place estimates and rates of production from current and proposed wells.
The information provided by both parties would be updated on a regular (at least annual)
basis, to ensure that it remains current and up to date.
1.3
Underground Operations - Gas Extraction Prior to Mining
Mine Co intends to commence pre-drainage immediately after ML grant within the area of
the underground mine IMA, with long wall operations expect to commence after 10
years. Mine Co may either elect to shorten the Notice Period (by serving an Acceleration
Notice) in order to conduct the pre-drainage itself immediately, or enter into an
agreement with Gas Co about the conduct of continuing pre-drainage.
In this scenario, Mine Co has decided not to issue an Acceleration Notice, and the parties
have agreed that Gas Co will conduct the pre-drainage on behalf of Mine Co, under the
authority of its PL. Mine Co will bear the incremental costs of this pre-drainage activity in
this case, but would otherwise have no compensation liability to Gas Co. In this scenario,
in addition to pre-draining CSG as required for safe future mining, Gas Co is able to
target all viable coal seams.
Gas Co will have a first right of refusal on the ICSG produced and will bear the carbon
and royalty liability for any ICSG that it takes.
Question
When can Mine Co
commence underground
mining/development?
Current Regime
Draft Bill
As soon as ML is
granted.
As soon as ML is
granted.
Mine Co must give
10 years notice
from 12 months
after date of MLA
lodgement – or
issue Acceleration
Notice and pay
compensation for
lost gas and
infrastructure. In
this case, Mine Co
decided not to do
so, given
agreement that Gas
Co will pre-drain.
Only obliged to
abandon any area
Only obliged to
abandon any area
Gas Co begins
abandonment
(Note: The parties have
agreed that Gas Co will
conduct pre-drainage in
this example)
When does Gas Co need
to abandon the IMA?
Proposed New
Principles
Maximising Utilisation of Coal and Coal Seam Gas Resources – A New Approach to Overlapping Tenure in Queensland
| page 96
Question
Current Regime
if agreed in CoDevelopment
Agreement.
Draft Bill
if agreed in CoDevelopment
Agreement.
Proposed New
Principles
activities upon
receipt of
Confirmation Notice
from Mine Co (18
months prior to
start of mining
operations).
As the IMA is in an
underground
context, Gas Co is
only required to
abandon those
areas of the IMA
where safe and
efficient coal mining
would be impacted
(e.g. the area of
any mining-related
seams) as
determined by Mine
Co's SSE acting
reasonably.
What compensation
must Mine Co pay to
Gas Co?
1.4
Only if subject to
terms of CoDevelopment
Agreement .
Only if subject to
terms of CoDevelopment
Agreement.
On basis that the
full 10 years Notice
Period is given and
no Acceleration
Notice is issued,
Mine Co would only
be liable to pay
compensation for
Gas Co’s affected
Major Gas
Infrastructure
(liability to be
assessed at the
time of
abandonment).
Open-cut Operations
Mine Co intends to start open cut operations immediately after the grant of the ML and
has therefore elected to issue an Acceleration Notice to Gas Co in respect of the open cut
IMA to reduce the Notice Period. The Gas Co has producing wells and some infrastructure
in both IMAs.
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Question
When can Mine Co
commence open cut
operations/construction?
Current Regime
As soon as ML is
granted.
Draft Bill
As soon as ML is
granted.
Proposed New
Principles
In this example, as
soon as the ML is
granted because
Mine Co has issued
an Acceleration
Notice to shorten
the 10 year Notice
Period.
Mine Co will be
liable for
compensation to
Gas Co (see below).
When does Gas Co need
to abandon IMA?
Only obliged to
abandon any area
if agreed in CoDevelopment
Agreement.
Only obliged to
abandon any area
if agreed in CoDevelopment
Agreement.
Gas Co begins
abandonment
activities upon
receipt of
Confirmation Notice
from Mine Co (18
months prior to
start of operations),
and must be fully
abandoned from
start of IMA.
Confirmation Notice
may be given at the
same time as an
Acceleration Notice.
What compensation
must Mine Co pay to
Gas Co?
Only if subject to
Co-Development
terms.
Only if subject to
Co-development
terms.
Mine Co must pay
compensation for
impacts to all of
Gas Co’s Major and
Minor Gas
Infrastructure in
the IMA because it
has issued an
Acceleration Notice
(liability to be
assessed at the
time of
abandonment).
In addition,
because Mine Co
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Question
Current Regime
Draft Bill
Proposed New
Principles
has truncated the
Notice Period it
must compensate
Gas Co for lost CSG
production during
that truncated
period.
1.5
Offsets for Compensation for Truncated Notice
Mine Co and Gas Co meet and discuss other options for offsetting lost CSG production
associated with the early commencement of operations at the open cut mine. Mine Co
may offer replacement gas (including ICSG) or other offsets (e.g. allowing Gas Co to
remain in another area for longer than expected in the life of Mine Plan).
1.6
Future Abandonment – Confirmation Notices
Mining and gas production continue as planned for a number of years, with the parties
exchanging information about their plans and operations on a regular basis, and looking
forward over at least a ten year period.
As pre-drainage activities approach completion in respect of the IMA for the underground
operations, Mine Co issues a Confirmation Notice to the Gas Co advising Gas Co that it
must abandon conflicting activities in that part of the underground IMA which is required
for safe and efficient mining operations within 18 months.
As open cut operations approach the edge of the relevant IMA, Mine Co will also issue a
Confirmation Notice advising Gas Co that it must abandon the first RMA contiguous and
adjacent to the IMA within 18 months.
Question
Does the
Confirmation Notice
in respect of the
underground IMA
trigger a
compensation
liability?
Current Regime
Only if subject to
Co-Development
terms.
Draft Bill
Only if subject to
Co-Development
terms.
Proposed New
Principles
No, unless Mine Co
requires Gas Co to
abandon the
underground IMA
before the end of
the Notice Period
(e.g. requires
abandonment after
only 8 years).
If compensation
liability is triggered,
the quantum will be
the lost CSG
production in the
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Question
Current Regime
Draft Bill
Proposed New
Principles
truncated period
(e.g. on this
example, 2 years
lost production) plus
cost of affected
Major and Minor Gas
Infrastructure.
Does the
Confirmation Notice
in respect of the
open-cut RMA
trigger a
compensation
liability?
1.7
Only if subject to
Co-Development
terms.
Only if subject to
Co-Development
terms.
No, unless Mine Co
requires Gas Co to
abandon the first
RMA before the
'date stamped'
timing effectively
truncating the
production period to
less than 10 years.
Change in Open-cut Plans
Circumstances require Mine Co to make two changes to its open cut Mine Plans.
The first change involves a change in direction and/or timing of operations within the
IMA. In this scenario, Mine Co has full flexibility and there are no implications for
compensation because all of the changes occur within the IMA.
In the second case, Mine Co needs to commence operations in the RMA earlier than
anticipated or in a new area. Accordingly, Mine Co advises Gas Co of its updated plans
and the revised 'date stamp' for commencement of mining operations (and hence
abandonment by Gas Co) of the affected areas. While Mine Co has the flexibility to
change its Mine Plan as required, the consequences of any such change will vary
depending on the impact on Gas Co’s 10 year 'production window' for the relevant area.
If the new 'date stamp' still provides Gas Co with the opportunity for a minimum ten year
production window from wells in the RMA or FMA, then no compensation is payable by
Mine Co. For example, the affected areas are currently date-stamped for mining in 15
years’ time, but the Mine Plans change to bring that development forward to 12 years’
time so Gas Co still has the opportunity for at least 10 years production from wells in
those areas.
If the new 'date stamp' no longer provides Gas Co with the opportunity for a minimum
ten year production window from wells in the RMA or FMA, then compensation will be
payable (with quantum based on the number of years of truncation – i.e. compensation
could range from 1 -10 years lost production). For example, the affected areas were
originally date stamped for mining in 12 years time, but the revised date stamp is now
only 5 years in the future, meaning that Gas Co no longer has the opportunity for a
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minimum ten year production window. Compensation would be payable in respect of 5
years lost CSG production (i.e. 10 year Notice Period is truncated by 5 years). If there
are currently no wells in the affected area and Gas Co could demonstrate that it had firm
plans to drill wells in that area in the relevant time frame and it would no longer be
economic to drill development wells as a result of the truncated Notice Period, then
compensation would be payable in respect of lost CSG production over the ten year
production window since it is this production that would be foregone by Gas Co.
1.8
Simultaneous Operations – Underground Mine Context
The surface areas of underground mines are often traversed by active infrastructure
including roads, gas and water pipelines, dams, powerlines, and railways – all of which
continue to operate in parallel with underground extraction. Similarly grazing and
farming operations typically continue with little disruption over most of the surface area.
Personnel continue to have access to the surface area as required to service
infrastructure or to conduct grazing or farming operations. Mining disturbance of the
surface is essentially limited to the mild transitory subsidence associated with the
underground progression of longwall extraction, which may require the relocation of
some surface infrastructure and the temporary exclusion of livestock.
A large proportion of the surface area of an underground mine should therefore remain
accessible for activities and personnel associated with surface CSG infrastructure –
including roads, gas lines, water lines , dams and power lines. Where underground mine
development is taking place within a producing gas field it may well be that the miner
would also want to access this existing infrastructure.
CSG wells that drain the seam to be mined would clearly have to be abandoned prior to
any possible connection with the underground mine workings. The mining seam or seams
may however represent only a small proportion of the coal sequence that hosts the CSG
resource and it may be that, subject to the approval of the SSE, gas drainage can
continue (or resume after mining) from non-mining seams that are adequately isolated
from possible connection the underground workings.
1.9
IMA and RMA Areas Post Mining
The IMA and RMA are progressively handed back by Mine Co to Gas Co as mining
proceeds and Gas Co’s production entitlements under its PL that were suspended within
the IMA/RMA during the period of sole occupancy for Mine Co would be fully reinstated.
This gives Gas Co the opportunity to enter these areas still part of its PL (this entry may
be either for the first time or to return).
Question
Current Regime
Draft Bill
What happens if the
Mine Co paid
compensation to the
Gas Co for lost
production from that
area (i.e. triggered
for a truncated
Subject to CoDevelopment terms.
Subject to CoDevelopment terms.
Proposed New
Principles
There will be a
reconciliation in the
event that Gas Co
subsequently
produces gas from
the relevant seams
within the IMA or
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Question
Current Regime
Draft Bill
Notice Period)?
What happens to
Mine Co’s
rehabilitation
obligations?
Proposed New
Principles
RMA that the Gas Co
received
compensation for.
Any increased
production costs
resulting from
previous mining
operations would
need to be taken
into account in the
reconciliation
mechanism.
Subject to CoDevelopment terms.
Subject to CoDevelopment terms.
Mine still obliged to
meet its
rehabilitation
conditions (under
EA). Mine Co and
Gas Co may decide
that it would be
preferable for Mine
Co to partially
rehabilitate but
leave access tracks
or infrastructure in
place for the Gas
Co’s use. If so, the
parties will need to
obtain variations
from DEHP to permit
this to occur.
Timing of Mine Co’s
rehabilitation
obligations would
also need to be
considered.
Who is responsible
for safety?
SSE.
SSE.
SSM to hold
statutory
responsibility for the
area being removed
from the SSE’s
statutory
responsibility.
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1.10 Safety Treatment
Mine Co's SSE will be responsible for the following:

the open-cut IMA;

pre-drainage works if Mine Co elects to carry out such works; and

SOZ activities for both Mine Co and Gas Co (this area will progressively change
over the life of the mine and will require appropriate notification to DNRM).
Gas Co's SSM will be responsible for the following:

pre-drainage works if Gas Co is contracted to carry out the pre-drainage under the
authority of its PL;

the balance of the overlapping ML that is not part of the IMA or SOZ areas (this
area will progressively change over the life of the mine and will require
appropriate notification to DNRM); and

any areas of the IMA and RMA that are progressively handed back by Mine Co.
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Schedule 5 – Area for Grandfathered Production Tenure
Applications
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QUEENSLAND RESOURCES COUNCIL
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© QUEENSLAND RESOURCES COUNCIL 2012